STEVE INSKEEP, HOST:
The Federal Reserve did nothing yesterday, which is just what they've been doing for a while on interest rates. The news here is in how they did it.
A MARTÍNEZ, HOST:
Two members of a Fed committee voted not to hold interest rates steady. That's a rare level of dissent, although a big majority stayed with Chairman Jerome Powell. And it comes amid an unprecedented pressure campaign by President Trump.
INSKEEP: NPR's Scott Horsley took an interest in this story. Hey there, Scott.
SCOTT HORSLEY, BYLINE: Good morning, Steve.
INSKEEP: So what is the difference of opinion here?
HORSLEY: Well, the president wants lower interest rates, and he's been very critical of the Fed for not moving more aggressively in that direction. It's not unusual for presidents to want lower interest rates to juice the economy in the short run. It is unusual for them to be as vocal as President Trump has. But the Fed was set up to be insulated from that kind of pressure precisely so it can make hard decisions when it has to to keep inflation under control.
Now, inflation's not nearly as high as it was a few years ago, but it's still higher than the Fed would like. And a lot of policymakers at the Fed are worried that the president's own tariffs could push prices higher still. Chairman Jerome Powell noted yesterday that the government's collecting about $30 billion a month in tariffs. That money has to come from someplace. Powell says, so far, it doesn't look as though foreign companies are picking up very much of the tab. Instead, it's mostly being paid by U.S. importers, retailers and, in some cases, consumers.
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JEROME POWELL: It's starting to show up in consumer prices. We expect to see more of that. And we know from surveys that companies feel that they have every intention of putting this through to the consumer, but, you know, the truth is, they may not be able to in many cases.
HORSLEY: That's because consumers are more price sensitive now than they were a few years ago. So it may be that American businesses have to eat more of the tariff costs themselves.
INSKEEP: OK. So the interest rates are set by committee. The vote is usually unanimous, but not this time. What happened?
HORSLEY: Yeah. Committee votes are often unanimous. Sometimes there's a stray no vote. Yesterday was the first time in more than 30 years that two Fed governors broke with their colleagues. Chris Waller and Michelle Bowman both said they would've preferred to cut rates by a quarter point this week. Waller gave a talk earlier this month where he argued that any price hikes associated with tariffs are likely to be a one-time thing. So they're not going to keep pushing prices up month after month and put upward pressure on inflation. He also thinks the job market is weaker than that low 4.1% headline unemployment rate would indicate. So Waller thinks the Fed should cut rates now before the job market gets any worse.
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CHRIS WALLER: That's my view. I'm kind of in the minority on this, but I've tried to lay out very clearly in economic terms why we could do this. It's not political.
HORSLEY: Waller and Bowman are the two Trump appointees on the Fed board. They were in the minority this week, but it's possible there will be more votes for a rate cut at the next Fed meeting in September.
INSKEEP: Well, I guess they're supposed to be driven by the data rather than politics. Do they get more data between now and then?
HORSLEY: Yes. We'll have two more months of jobs numbers, two more months of inflation data, and that could offer a clearer picture of just how Trump's tariffs are playing out. But there's a wrinkle. The Labor Department said this week it's having to scale back the number of price checks it does each month by about 15% because of the president's federal job cuts. So the government's inflation yardstick might not be as reliable as it was in the past. Now, Powell was careful not to comment on the job cuts, but he did say both the Fed and lots of private businesses really depend on these government economic indicators, and it's important they be accurate.
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POWELL: The government data really is the gold standard in data, and we need it to be good and be able to rely on it. We'll have to make do with what we have, but I certainly hope that we get what we need.
HORSLEY: Now, we will get another important signal about the economy tomorrow. That's when the Labor Department reports on jobs and unemployment for the month of July.
INSKEEP: NPR's Scott Horsley is monitoring the signals. Scott, thanks so much.
HORSLEY: You're welcome. Transcript provided by NPR, Copyright NPR.
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