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3h ago

Fed Keeps Rates Unchanged as Tariffs and Geopolitical Strains Cloud Outlook

Policymakers held borrowing costs at 4.25%–4.5% to guard against tariff- and conflict-driven price pressures, signaling they see room for cuts by year-end.

The Federal Reserve building is seen in Washington, U.S., January 26, 2022. REUTERS/Joshua Roberts/File Photo
Federal Reserve chair Jerome Powell is expected to announce the central bank will hold rates steady on Wednesday.
Financial markets think that the Bank of England’s rate-setting committee will vote in a similar vein to the shadow MPC: a 7-2 vote split in favour of a hold is anticipated
Federal Reserve Chair Jerome Powell delivers remarks during the Division of International Finance 7th Anniversary Conference at the Fed on June 02, 2025 in Washington, DC.

Overview

  • The Federal Open Market Committee unanimously maintained its benchmark rate at 4.25%–4.5% at the June meeting after weak retail sales and sluggish factory output underscored cooling growth.
  • Officials cited President Trump’s import levies and recent Israel-Iran missile exchanges as key uncertainties that could stoke inflation and disrupt markets.
  • The Fed’s updated dot plot is expected to show a wide dispersion of views, with the median forecast pointing to one to two quarter-point rate cuts during 2025.
  • Traders now see about a 60% probability of a 25-basis-point easing by the September meeting as economic data and trade tensions evolve.
  • Despite persistent calls from President Trump and Vice President Vance for deeper cuts, Chair Jerome Powell has emphasized the Fed’s independence and a cautious wait-and-see approach.