 has decided to keep interest rates unchanged){kind=link}
In its latest policy meeting, the US Federal Reserve’s Federal Open Market Committee (FOMC) has decided to keep interest rates unchanged for the fourth consecutive time, maintaining the target range at 4.25% to 4.5%. The decision reflects the central bank’s continued cautious stance amid geopolitical tensions and trade-related volatility. The rates have remained steady since December 2024.
Economy Shows Resilience but Inflation Remains Elevated
According to the Fed’s policy statement, while fluctuations in net exports have impacted the data, the US economy continues to grow at a solid pace, supported by a low unemployment rate. However, inflation is still considered “somewhat elevated”, warranting a wait-and-watch approach by policymakers.
Fed’s Dot Plot Indicates Two Rate Cuts in 2025
The Fed’s dot plot chart, which outlines projections by individual members, suggests a median forecast of two rate cuts in 2025, totaling a 50 basis point reduction. Despite holding rates steady for now, officials signaled a modest easing of monetary policy in the months ahead, contingent on inflation trends and economic performance.
Participants in the meeting downgraded their GDP growth forecast for 2025 from 1.7% to 1.4%, while projecting core PCE inflation—the Fed’s preferred measure—to reach 3% by the year-end. The unemployment rate is also expected to climb from 4.2% to 4.5%, reflecting ongoing stagflationary pressures in the economy.
Powell Cites Tariffs as Key Risk to Inflation Outlook
In the post-meeting press conference, Fed Chair Jerome Powell noted a recent uptick in inflation expectations, attributing the shift partially to new tariffs imposed earlier this year. Powell explained that while the tariff-induced inflation could be short-lived, it might temporarily push up prices and slow economic activity, as it represents a one-time adjustment in price levels rather than a sustained inflation trend.
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