Fed votes 9-3 to hold rates, first three-member dissent in decade

Trump proposes $5,000 ‘dividend’ if Republicans win midterms

The Federal Reserve voted 9-3 in July to hold interest rates steady — the first time in a decade that three board members publicly dissented on the same policy decision. The split comes as the central bank prepares for its next board meeting next week, with Governor Christopher Waller and Chair Kevin Warsh signaling they would consider raising rates if inflation fails to ease. Energy prices added pressure Friday, with diesel crossing $6 per gallon for the first time and AAA reporting an average gas price at the pump of $4.29 per gallon — $1.10 higher than a year earlier.

President Donald Trump has publicly pressed the Fed to lower borrowing costs. In a social media post last week, Trump said the central bank “must get smart” and lower rates. “A STRONG COUNTRY MEANS A LOWER INTEREST RATE,” he declared. On Wednesday night, Trump said Americans would get a $5,000 “dividend” if Republicans win a majority in the midterms — a proposal critics described as akin to bribery.

U.S. consumer prices rose 3.4% year-over-year in August, unchanged from July and well above the Federal Reserve’s 2% target, according to Bureau of Labor Statistics data released Friday. Core inflation, which strips out volatile food and energy prices, climbed to 2.4%. The annual rate has eased from a three-year high of 4.2% reached in May but remains above levels seen before the war in Iran, largely because of higher energy prices tied to the end of a U.S.-Iran ceasefire.

Energy prices crossed fresh milestones the same day the report was released. Diesel, used for trucks, buses and trains, passed $6 a gallon for the first time. AAA reported an average gas price at the pump of $4.29 per gallon, $1.10 higher than the year-earlier average.

Interest rates now sit at a range of 3.5% to 3.75%, two percentage points lower than the 5.25% to 5.5% range that prevailed two years ago. One of the most direct ways the federal government can affect prices comes from the power of the U.S. Federal Reserve, which sets the interest rates that have an effect on the price of loans, including mortgages, car payments and student debt.

The August inflation report will be a key factor in the Fed’s decision to change interest rates or hold them steady at its board meeting next week. Either move could have heavy implications for the U.S. economy.

Fed Governor Christopher Waller said last week there was “considerable uncertainty about how military conflicts, trade policy, and artificial intelligence will affect prices and economic activity.” Speaking at a Reuters event, Waller added: “If there is continued progress toward our 2% goal, then I am willing to support holding the policy rate at its current level. But if inflation comes in hot, I would consider a rate hike.”

The Fed’s new chair, Kevin Warsh, used a speech at the Jackson Hole, Wyoming, symposium last month to signal the central bank’s intent. Underlying inflation trends have not “meaningfully improved” over the summer, Warsh said. “We must be confident that underlying inflation is moving to our objective, clearly and at sufficient speed. Otherwise, we have work to do,” he said.

The August reading lands against a backdrop of record-low consumer sentiment earlier this summer, as Americans said they were struggling to afford gas and groceries. Concerns about inflation have also reached the bond market, where yields on some U.S. Treasuries have hit their highest levels since the 2008 recession.

History offers some context for the current debate. Annual inflation reached 9.1% in 2022, a 40-year high. The Fed responded with repeated rate increases, bringing inflation down to 2.3% by April 2025. With the August reading back above 3%, some Fed economists have said it might be time for higher rates once again.