Overview
The United States Federal Reserve has decided to keep its benchmark interest rate unchanged at 4.50 percent, as expected by economists and investors. This cautious stance comes amid concerns about rising inflation, geopolitical tensions, and uncertainty surrounding potential trade tariffs proposed by former President Donald Trump.
While earlier projections pointed to multiple rate cuts in 2025, the latest update from the Federal Reserve shows a slower and more divided outlook. The central bank now expects only limited reductions in the coming years, depending on how inflation and the broader economy evolve.
Key Highlights from the June Fed Meeting
Current interest rate: 4.50%
Expected rate: 4.50%
Previous rate: 4.50%
Future Interest Rate Forecasts
By the end of 2025: 3.9% (unchanged from March)
By the end of 2026: 3.6% (up from 3.4 percent)
By the end of 2027: 3.4% (up from 3.1 percent)
Long-term outlook: 3.0% (unchanged)
Out of 19 Fed officials:
7 expect no rate cuts in 2025
2 expect one rate cut
8 expect two rate cuts
2 expect three rate cuts
This data shows that there is growing disagreement among Fed members on the path of rate cuts, with fewer officials expecting quick easing.
Economic Forecasts: What Changed Since March
In its latest projections, the Federal Reserve now expects PCE inflation in 2025 to be 3.0%, up from 2.7% in its March forecast. Core inflation is also expected to be 3.1%, slightly higher than the previous estimate of 2.8%. The unemployment rate for 2025 is now projected at 4.5%, compared to 4.4% earlier. In terms of economic expansion, the Fed lowered its GDP growth forecast for 2025 to 1.4%, down from 1.7% in March. However, its long-run growth estimate remains unchanged at 1.8%.
The latest estimates suggest higher inflation, slightly weaker economic growth, and a modest increase in unemployment compared to the March projections.
How Markets Reacted
After the Federal Reserve’s statement:
The yield on the 10-year Treasury note fell to 4.34 percent
The 30-year Treasury bond yield dropped to 4.85 percent
The two-year Treasury yield declined to 3.89 percent
The yield curve between two-year and ten-year notes steepened, which may indicate that investors expect slower growth ahead.
Federal Reserve Chair Jerome Powell’s Comments
Chairman Jerome Powell emphasized the following points during his press conference:
Inflation remains above the Federal Reserve’s target of 2 percent
The labor market is balanced and not contributing to rising inflation
Uncertainty in the economy has reduced since April
Concerns remain about trade tariffs and their potential impact on prices
The Fed is watching global tensions, including the Israel-Iran conflict
Powell stated that while some progress has been made, more evidence is needed before the Fed can confidently begin cutting interest rates. He acknowledged that uncertainty around trade policy, especially possible new tariffs, could slow inflation improvement.
Outlook for Interest Rates
According to market data:
There is a 71% chance of a rate cut in September, up from 60 percent before the Fed meeting
The chances of an October cut have increased to 85%
Markets currently expect about 46 basis points in total cuts in 2025, similar to pre-meeting expectations
These numbers suggest that investors still believe the Federal Reserve may begin easing policy this year, but the pace will be slow and dependent on inflation data.
Why the Fed is Taking a Cautious Approach
The Federal Reserve is worried that renewed trade tariffs and global risks could drive inflation higher in the months ahead. Chairman Powell explained that the Fed needs greater confidence that inflation is moving sustainably toward 2 percent before reducing rates.
Additionally, the Fed sees signs of a slowing economy, with lower GDP growth forecasts and slightly higher unemployment projections for 2025.
Trump Slams Powell Ahead of FOMC, Demands Rapid Rate Cuts
Just hours before the FOMC decision, U.S. President Donald Trump sharply criticized Fed Chair Jerome Powell, claiming interest rates should be 2% lower. He suggested no rate cut would be announced today and hinted at his own plan: starting with rapid short-term cuts followed by long-term adjustments. Jokingly, he added, “Maybe I should appoint myself at the Fed—can I do that?”
After the policy announcement, President Trump said, “Too late—Powell is the worst. A total fool who’s costing America billions.”
The Federal Reserve’s decision to hold interest rates steady at 4.50% reflects its cautious approach amid mixed economic signals. While some officials still support two rate cuts in 2025, a growing number see no cuts happening at all.
With inflation expected to remain above target and uncertainty over trade policy continuing, the path to lower interest rates is becoming less certain. Investors, businesses, and borrowers should prepare for the possibility that interest rates will stay higher for longer.
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