Photo: Win McNamee / Getty Images News / Getty Images
The Federal Reserve decided to keep interest rates unchanged for the fourth consecutive time on Wednesday (June 18), maintaining the benchmark rate at 4.25% to 4.5%. This decision comes amid ongoing economic uncertainties, including the impact of President Donald Trump's tariffs on inflation and economic growth. Despite pressure from President Trump to lower rates, the Fed plans to implement two rate cuts later this year, as previously projected in March.
Fed Chair Jerome Powell explained that the decision to hold rates steady is due to the unpredictable effects of tariffs on the economy. Powell noted that while recent inflation reports have been favorable, goods prices are rising due to new tariffs, and more increases are expected over the coming months. "We’re beginning to see some effects and we do expect to see more of them over the coming months," Powell said, emphasizing the need for caution in adjusting rates.
The Fed has revised its economic outlook, now predicting a slower economic growth rate of 1.4% for the year, down from the previous estimate of 1.7%. The core Personal Consumption Expenditures (PCE) inflation measure is expected to rise to 3.1%, higher than the earlier forecast of 2.8%. The unemployment rate is projected to increase slightly to 4.5% by the end of the year.
President Trump has criticized Powell for not cutting rates, suggesting he might appoint himself to the Fed. Despite these comments, Powell reiterated that the Fed's priority is maintaining a solid economy.
The Fed's decision reflects a cautious approach as it navigates the dual challenges of managing inflation and supporting economic growth amid trade-related uncertainties. The central bank remains divided on the number of rate cuts needed, with some officials advocating for two cuts this year, while others foresee fewer adjustments.