• The Federal Reserve maintains interest rates at 4.25%-4.50% amid pressure from President Trump for cuts.
• Two Fed governors dissent, marking the first dissent in over 30 years, indicating internal division on policy direction.
• Jerome Powell emphasizes caution, stating that inflation remains above target and uncertainty persists in the economic outlook.
• Markets respond negatively with reduced expectations for an imminent rate cut, reflecting the Fed's cautious stance.
• Upcoming economic data reports will be critical for future rate decisions, especially concerning inflation and employment trends.

The U.S. Federal Reserve decided on Wednesday to hold interest rates steady between 4.25% and 4.50% for the fifth consecutive meeting, despite sustained pressure from President Donald Trump to cut borrowing costs. This decision comes as the central bank aims to navigate ongoing economic uncertainties exacerbated by Trump's tariff policies, which have complicated inflation dynamics, according to Channel News Asia, Al Jazeera, and Bangkok Post.

Fed Chair Jerome Powell noted that while the recent data showed a rebound in GDP growth, this was heavily influenced by a pullback in imports as businesses stockpiled inventories in anticipation of tariffs. He stated that the central bank is still assessing how fluctuating trade policies will affect inflation and employment, which leaves policymakers hesitant to reduce rates now, as reported by Channel News Asia, Reuters, and HuffPost.

During the meeting, dissent arose from two Fed governors, Michelle Bowman and Christopher Waller, both of whom supported a rate cut, indicating a growing internal divide within the board over monetary policy direction. This marks the first dissent from two members in over three decades, reflecting the pressures faced by the Fed in balancing political demands and economic realities, as noted by Bangkok Post and Reuters.

The Fed's policy statement indicated that although economic growth has moderated, inflation remains somewhat elevated, currently exceeding the Fed's target level of 2%. Powell reiterated the importance of gathering additional economic data before making any policy shifts, aiming to prevent potential inflationary risks from escalating, according to Reuters and Al Jazeera.

In response to the Fed's cautious stance, markets adjusted their expectations, now forecasting a decreased likelihood of rate cuts at the September meeting. The probability of a cut has dropped significantly, demonstrating that investor sentiment is reacting to the Fed's emphasis on a data-dependent approach to future monetary policy, as observed by Reuters and HuffPost.