WASHINGTON – The Federal Reserve held interest rates steady on Wednesday as higher inflation is expected and economic growth is declining in the future, but still noted two cuts later this year.
With the market expecting no central bank relocation this week, the Federal Open Market Committee has kept its main lending rate in the range of 4.25%-4.4.5%, which has been in the market since December.
With the rate decision, the committee passed its closely watched “points” that two cuts were still on the table by the end of 2025. However, it has reduced once in 2026 and 2027, lowering expected future interest rates by four, or a full percentage point.
The chart shows that Fed officials continue to have uncertainty about the future of interest rates. Each point represents an official’s expectations for the rate. There is widespread spread across the matrix, with the outlook pointing to a Fed funding rate of about 3.4% in 2027.
Seven of the 19 participants said they do not want cuts this year, starting with four in March. However, the Commission unanimously approved the policy statement.
Economic forecasts from conference participants point to further stagnation pressure, with participants seeing GDP at a rate of 1.4% in 2025 and inflation reaching 3%.
GDP forecasts have declined
The revised forecast, which was last updated in March, decreased by 0.3 percentage points in GDP, and the increase in the price index of personal consumption expenditure increased. The core PCE for eliminating food and energy prices is expected to be 3.1%, also an increase of 0.3 percentage points. The revision rate of unemployment prospects is small, as high as 4.5%, 0.1 percentage point higher than March’s 0.1 percentage point and 0.3 percentage point higher than the current level.
The FOMC statement has rarely happened since May meetings. Broadly speaking, the economy grew at a “stable pace”, “low” unemployment and “slightly higher” inflation, the commission said.
Furthermore, the committee shows that less attention is paid to the diffuse and cloud of the economy and White House trade policy.
“Uncertainty about the economic outlook has declined, but is still increasing. The Commission notes the risks of its dual mandate,” the Commission said.
period Press ConferenceFed Chairman Jerome Powell It is recommended to wait for clarity if you have time.
“For the time being, we have the ability to wait for more understanding of the economic process before considering any adjustments to our policies,” Powell said.
US Stocks After the announcement, shake near the flat line.
Trump pushes for tax cuts
although Fed’s statement The president has not elaborated on why uncertainty has disappeared Donald Trump Some of his fierce trade rhetoric eased, and the White House was in a 90-day negotiation period on tariffs.
However, Trump’s remarks about the Fed have not diminished.
Earlier Wednesday, the president once again slammed Powell and his colleagues for not relaxing. Trump said Fed funds rate should be reduced by at least 2 percentage points, and Mocking Powell as “stupid” Because there is no push for the committee to cut.
Federal Reserve officials don’t want to moveWorrying that Trump’s tariffs this year may lead to Inflation in the coming months. So far, the price meter has not shown that responsibility has had a big impact. Before the “Liberation Day” announcement on April 2 Helps deflect their influence.
“Everyone I know predicts inflation in the coming months makes sense because someone has to pay tariffs,” Powell said.
this Conflict between Israel and Iran and The prospect of higher energy prices Potential potential factors that prevent the Fed from cutting. The statement did not mention the impact of the Middle East combat.
The gradually softening of the economy could provide a motivation for a decrease later this year.
Recent labor market data show that layoffs are spreading, long-term unemployment is also increasing, and consumers spend less. Retail sales fell nearly 1% in May Recent data reflects the cooling housing market, which has begun to reach its lowest level in five years.
“Effectively, they sit in their hands, waiting for whether the tariffs increase inflation or the job market begins to move, regardless of which part of the dual mandate is affected, may guide them in any direction they take, although bias is still lowering rates (or at least keeping the same rate; not raising rates; not raising rates).
Zaccarelli was not surprised that interest rates remained stable. However, he said the market was surprised by the comments that uncertainty was “reduced”.
But for Trump, the importance of lower interest rates stems from the high cost of the government’s funding of its $36 trillion debt.
The debt interest program reached a total of $1.2 trillion this year, exceeding all other budget items except Social Security and Medicare. The Fed cut last time in December, with higher fiscal yields for the whole year, giving Budget deficit It could be close to $2 trillion, or more than 6% of GDP.
Correction: Conference participants expect GDP to increase at a rate of 1.4% in 2025. An earlier version of the story was misunderstood.
