Fed holds rates steady, but slows pace of expected future cuts

STORY: :: Fed Chair Jerome Powell says the Fed will hold rates steady as tariff uncertainty lingers

:: June 18, 2025

:: Washington, D.C.

:: Jerome Powell, U.S. Federal Reserve Chair

"In support of our goals. Today, the Federal Open Market Committee decided to leave our policy interest rate unchanged. We believe that the current stance of monetary policy leaves us well positioned to respond in a timely way to potential economic developments." // "Changes to trade, immigration, fiscal and regulatory policies continue to evolve and their effects on the economy remain uncertain. The effects of tariffs will depend, among other things, on their ultimate level. Expectations of that level, and thus of the related economic effects, reached a peak in April and have since declined. Even so, increases in tariffs this year are likely to push up prices and weigh on economic activity."

In new economic projections, policymakers sketched a modestly stagflationary picture of the U.S. economy, with economic growth slowing to 1.4% this year, unemployment rising to 4.5% by the end of this year, and inflation finishing 2025 at 3%, well above the current level.

While policymakers still anticipate cutting rates by half a percentage point this year, as they projected in March and December, they slightly slowed the pace from there to a single quarter-percentage-point cut in each of 2026 and 2027 in a protracted fight to return inflation to the central bank's 2% target.

Under the new projections, inflation remains elevated at 2.4% through 2026 before falling to 2.1% in 2027 amid largely stable unemployment.

The rate projections from Fed officials for this year at least are in line with recent market expectations for a quarter-percentage-point rate reduction as soon as the September meeting. The central bank continues to ignore Trump's call for immediate rate cuts, a move Fed officials feel would be counter to their effort to ensure inflation returns to their 2% target until key tariff changes are finalized and their effects are better understood.