US Fed Holds Rates Again Amid 1st Internal Dissent Since 1993

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Two Fed governors vote for a rate cut in rare dissent; statement hints at growing economic uncertainty despite steady labor market and inflation risks

By S JHA

MUMBAI, July 30, 2025 — The US Federal Reserve on Wednesday held its benchmark interest rate steady at 4.25%–4.5%, marking a continuation of its “wait-and-see” policy stance amid growing signs of an economic slowdown. However, what stood out was a rare split within the Fed’s policy committee, with two governors voting for an immediate rate cut — the first such public dissent in over three decades.

According to the official Federal Open Market Committee (FOMC) statement, economic growth in the US has moderated in the first half of the year, even as labour market conditions remain solid and inflation stays somewhat elevated. The central bank cited ongoing uncertainty around the economic outlook, particularly in light of global trade tensions, especially the Trump administration’s tariffs on India and China.

“Although swings in net exports continue to affect the data, recent indicators suggest that growth of economic activity moderated,” the FOMC said. The July language marked a downgrade from the June statement, which had described growth as continuing “at a solid pace.”

First Dissent Since 1993: Pressure Building to Cut

Two Fed governors — Michelle Bowman and Christopher Waller — broke ranks and voted for a 25-basis-point rate cut, citing concerns about slowing economic momentum and the need to support financial conditions. According to analysts at Capital Economics, this marks the first time since 1993 that two Fed Board Governors have dissented against the Chair’s decision in the same meeting.

Economists see this as a clear crack in the Fed’s normally unified front. “It’s a signal that pressure is building within the FOMC to pivot,” said EndGameMacro, a policy watcher, in a post on X. “While Powell isn’t ready to show his hand, the internal dissent is telling,” it added.

Adding intrigue to the decision, Governor Adriana D. Kugler was absent from the vote, further narrowing the margin and spotlighting the divide inside the Fed.

Liquidity Quietly Supported Behind the Scenes

While the Fed’s public messaging remained cautious, financial observers noted that behind the scenes, the central bank is maintaining a strong liquidity safety net. The Standing Repo Facility (SRF) — with a minimum bid rate of 4.5% and a massive $500 billion cap — remains intact.

“It’s the Fed’s stealth backstop,” said EndGameMacro. “They’re publicly hawkish, rhetorically cautious, and quietly lubricating the system. Watch what they fund, not just what they say,” it noted.

June saw record usage of the SRF, but the July statement made no direct mention of this liquidity support, even though it is now widely viewed as a core element of the Fed’s operational posture.

Analysts believe that the Fed is not ruling out a rate cut later this year, especially if tariffs, weakening exports, and tighter credit conditions persist. However, Chair Jerome Powell is likely to wait for more conclusive economic data before signaling a shift in stance.

“The Fed’s message is clear: we’re not cutting yet, but we’re not dismissing the need either,” said a senior economist at Bloomberg TV. The Fed navigates 2025’s economic paradox — elevated inflation, softening growth, and political uncertainty. Markets keep a watch on not just what the Fed says, but what it funds.

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