Fed Holds Rates Steady; Signals Two Cuts Possible Later In 2025
The Fed acknowledged that overall uncertainty has decreased, but remains “elevated,” and that it continues to monitor risks affecting its dual mandate—maximum employment and price stability
The US Federal Reserve opted to keep its benchmark interest rates unchanged in its latest policy decision, maintaining the range at 4.25 per cent to 4.5 per cent following the June 17–18 Federal Open Market Committee (FOMC) meeting. This marks the sixth consecutive meeting without a change, as the central bank continues to navigate persistent global economic instability and uncertain trade dynamics.
While rates remain steady for now, the Fed’s latest dot plot suggests the potential for two cuts before the end of the year. However, the central bank emphasised that any future moves would depend on how incoming data evolves, noting in its statement that it will “carefully assess incoming data, the evolving outlook, and the balance of risks.”
“Although swings in net exports have affected the data, recent indicators suggest that economic activity has continued to expand at a solid pace. The unemployment rate remains low, and labor market conditions remain solid. Inflation remains somewhat elevated,” the Fed said.
Cautious Stance Continues As Tariff Pause Looms
The Fed acknowledged that overall uncertainty has decreased, but remains “elevated,” and that it continues to monitor risks affecting its dual mandate—maximum employment and price stability. Given this environment, analysts had widely anticipated that the Fed would hold rates steady. Data from the CME FedWatch tool indicated nearly unanimous market consensus ahead of the decision.
President Donald Trump’s 90-day pause on tariffs with major trading partners remains a key factor in the Fed’s cautious tone. Chair Jerome Powell reiterated in May that the central bank needs more clarity before acting. “It’s not a situation where we can be preemptive because we actually don’t know what the right response to the data will be until we see more data,” Powell said.
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Fed Faces Political Pressure
According to the May FOMC minutes, committee members support maintaining the current rate path while the economic consequences of the tariff policies unfold. The Fed also expects trade tensions to slow down economic growth in the coming quarters.
President Trump, however, has continued to criticize the central bank. “We have a stupid person at the Fed. He probably won’t cut today... Maybe I should go to the Fed. Am I allowed to appoint myself at the Fed?” he said. The President added, “I don’t even think he’s political, I think he hates me.”
Despite such criticism, the Federal Reserve has underscored its commitment to independence and data-driven decision-making. Powell has often found himself at the center of political attacks, yet has maintained a steady hand.
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