Federal Reserve Holds Interest Rates Steady, Signals Two Cuts in 2025
The Federal Reserve opted Wednesday to keep its benchmark interest rate unchanged, leaving the federal funds rate in the 4.25% to 4.50% range. The move, marking the fourth consecutive meeting without a rate change, comes as inflation moderates and the labor market remains strong.
The decision follows a series of rate cuts in late 2024, including a 50-basis-point reduction in September and two 25-basis-point cuts in November and December. In its latest statement, the Federal Open Market Committee (FOMC) said, “Recent indicators suggest that economic activity has continued to expand at a solid pace,” noting that unemployment remains low while inflation is “somewhat elevated.”
Fed Chair Jerome Powell emphasized that the central bank’s current policy stance allows it to remain flexible in responding to future economic developments.
“Despite elevated uncertainty, the economy is in a solid position,” Powell said during a post-announcement press conference. “The unemployment rate remains low and the labor market is at or near maximum employment.”
The Fed also released updated projections, indicating two interest rate cuts in 2025, followed by one each in 2026 and 2027. Inflation is expected to peak at 3% this year, with a gradual decline to the Fed’s 2% target by 2027. Meanwhile, unemployment is projected to increase to 4.5% over the next two years.
Powell acknowledged that new tariffs implemented by the Trump administration could pose upward pressure on inflation, stating that the full effects of these tariffs may take time to reach consumers.
President Donald Trump, who nominated Powell in 2017, renewed criticism of the Fed chair on Wednesday, calling him “a stupid person” and slamming the decision not to cut rates. Powell declined to comment directly on Trump’s remarks but reaffirmed the Fed’s focus on economic data and policy independence.
Markets responded cautiously to the Fed’s announcement. The probability of a rate cut at the next meeting in July rose slightly, while expectations for a September cut increased to over 60%, according to the CME FedWatch tool.
Economists offered mixed reactions. Bill Adams of Comerica Bank said the Fed “still think they could cut rates this year, but are less confident about that view” due to recent geopolitical and trade-related developments. Cory Stahle, senior economist at the Indeed Hiring Lab, noted that a “good-enough-for-now labor market” supports the Fed’s wait-and-see approach.
The Fed’s next monetary policy meeting is scheduled for July 29–30.
With input from Fox News.
