The U.S. Federal Reserve's Federal Open Market Committee (FOMC) has kept interest rates unchanged at 4.25 percent to 4.5 percent following the June 17-18 meeting; the central bank maintained the same level since December 2024 amid ongoing geopolitical tensions and trade-related volatility.
According to the Federal Reserve's dot plot, there could be two rate cuts seen later this year. However, the Federal Reserve noted 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," said the central bank in a statement.
The Fed added that the uncertainty about the economic outlook has diminished but remains elevated. "The Committee is attentive to the risks to both sides of its dual mandate."
Despite concerns over slowing economic growth, the Fed was widely expected to hold rates steady. Ahead of the meeting, the CME FedWatch tool showed nearly 100 percent of market participants expected no change in the key lending rate.
Analysts believe the central bank is likely to maintain its cautious stance, especially with President Donald Trump's 90-day tariff pause for key trading partners still in place.
Depending on the tariffs, there is an expectation, conditional on what happens, that there will be upward pressure on inflation. "In any case, 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," said U.S. Federal Reserve Chairperson Jerome Powell, in a press conference following the FOMC meeting in May.
According to the minutes of the FOMC meeting in May 2025, the Federal Reserve's Federal Open Market Committee members support maintaining status quo until Trump's tariff story plays out. Largely, members are penciling in slower economic growth from the impact of the tariffs going ahead.
Follow our live blog to catch all the updates on the US Federal Reserve meeting
Further, U.S. President Donald Trump said, "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?" The President added, "I don’t even think he’s political, I think he hates me."
The Federal Reserve has taken stringent efforts to maintain policy independence amid the growing clamor for a cut in the benchmark rate. The Fed Chairperson Jerome Powell has been the recipient of sharp criticisms from the current administration.
Analysts from Bank of America believe that the Federal Reserve will avoid cutting the key benchmark lending rate through 2025, but keep the possibility for one rate cut open. “The Fed’s main message at the June meeting will be that it remains comfortably in wait-and-see mode," said the lender's economist Aditya Bhave, adding, “Investors should focus on Powell’s take on the softening labor data, the recent benign inflation prints and the risks of persistent tariff-driven inflation.”
According to experts from KPMG, "the Fed would no doubt be cutting again by now if not for the uncertainty regarding tariffs and a recent escalations of tensions in the Middle East."
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
