Fed Holds Rates ⁣Steady, signals Possible Cuts in 2025 Amid Inflation, Growth Concerns

Updated June⁤ 20, 2025
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The Federal Reserve opted to hold steady its benchmark interest rates, remaining in a ⁣range of 4.25% to 4.5%,following its meeting.This marks the fourth consecutive pause,reflecting a cautious stance amid economic uncertainties,including inflationary pressures from tariffs.

The FOMC stated that while economic uncertainty has lessened, it remains ‍elevated, and the committee is closely monitoring risks to its dual mandate.

Despite the rate pause, the Fed’s “dot plot” indicates a median expectation of two rate cuts by the close of 2025, totaling 50 ⁢basis points. However, ⁤the number⁤ of officials anticipating no rate cuts in 2025 increased from four in March to seven.

The Fed also lowered its 2025 US GDP forecast from 1.7% to 1.4% while raising inflation estimates. The median ⁣projection for ⁢core Personal Consumption Expenditures (PCE) inflation at the end of 2025⁣ rose to 3.1%, compared to the 2.8% projected in March.

inflation remains above ‍the Fed’s 2% target. Powell highlighted the upward pressure on inflation due to tariffs. While tariffs on most countries have been reduced to 10%, imports from China face a 55% tariff, with the future of these rates uncertain.

“Everyone that I know is forecasting a meaningful increase in inflation in‍ coming months from‍ tariffs because someone has to pay‍ for the tariffs,” Powell said.

Powell cautioned that U.S. consumers will bear some of the cost of tariffs. He stated that the cost of tariffs ultimately has to be paid,and some of it will fall on the end consumer.

Powell indicated the‍ Fed is prepared to adopt a “wait and watch” approach regarding future rate cuts, dismissing the possibility of near-term cuts. He noted the⁣ economy’s solid shape and the labor market’s lack of urgent need for a rate cut.

Chris Zaccarelli, chief investment officer at Northlight Asset Management, said the Fed is “sitting on their hands, waiting to see if tariffs increase inflation or the jobs market starts to falter.”

Former President trump has repeatedly criticized Powell for not cutting rates, calling him “stupid” and⁣ “political.” He has asserted that there is no inflation and that the U.S. is experiencing ⁣only success.

Trump has previously urged Powell to cut interest rates, stating that the ECB is expected to cut rates for the seventh time. He also ⁣suggested that Powell’s termination could ‍not come fast enough.

While Trump appointed Powell as Fed chair, their relationship ⁤was strained by Powell’s rate increases during Trump’s presidency. In 2022, President Biden reappointed Powell as Fed chair for⁢ a term lasting⁢ until mid-2026. Powell has stated that he intends to serve his entire tenure.

What’s next

The Fed’s recent meeting suggests that U.S. interest rates may remain elevated for an extended period. Timothy Chubb, Executive Vice President and ⁤Chief Investment Officer at Girard, noted that this creates ⁣a challenging habitat for those with high-interest debt or businesses ⁣reliant on borrowing.