Your savings, your investments and your loans are hurting.
Tell’em to hang in there a bit longer.
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Interest rates are expected to stay steady until maybe – and that’s a big maybe – the fall.
Related: Fed interest rate cut decision resets forecasts for the rest of this year
That’s when economists and market watchers say there could be a cut, bringing sweet relief to wallets from Main Street to Wall Street.
But the Federal Reserve Board made clear this week it isn’t moving interest rates until the impact of one major emerging economic shock is known.
Jerome Powell, chairman of the US Federal Reserve, is under pressure to cut interest rates this year.
What the Fed interest rate decision means to you
The Fed opted to keep rates at their current levels, expecting a rise in inflationary risk over the next three months and perhaps for the rest of the year.
This prudent, wait-and-see attitude is directly tied to the White House’s whipsawing trade wars, Fed Chair Jerome Powell told reporters.
He cited the central bank’s dual mandate requiring a cautious approach to monetary policy to keep both inflation and unemployment relatively low.
Balancing prices and jobs is challenging because higher interest rates will lower inflation but reduce employment numbers.
Conversely, lower interest rates decrease unemployment rates but increase inflation.
Related: The Federal Reserve has bigger problem on its hands than tariffs
The Federal Open Meeting Committee controls the Federal Funds Rate, which banks charge each other overnight to borrow money.
This is tied to the cost of borrowing money for consumers, businesses and investors.
Both the May CPI and jobs reports were cooler than expected but housing starts and retail spending saw surprise slumps.
The FOMC said it would keep the Federal Funds Rate at 4.25% to 4.50% for June.
WASHINGTON DC, UNITED STATES – MARCH 6: Jerome Powell, Chairman of the U.S. Federal Reserve, makes a speech during the House Financial Services Committee hearing at the Rayburn House Office Building in Washington DC, United States on March 6, 2024. (Photo by Celal Gunes/Anadolu via Getty Images)
Fed offers guidance on next steps on interest rates
Long-time analyst Peter Tchir said the Fed’s holding pattern was a bit of a surprise given the tepid jobs numbers.
“They have a fear of tariffs, that at this stage, might be a bit aggressive.’’ Tchir wrote on TheStreet Pro. “They seem very content to “wait” to see if it shows up, regardless of any current inflation data. That’s somewhat rational, but it’s starting to seem excessive.’’
Data over the next few months will indicate if the Fed will decide on two or fewer rate cuts in 2025, portfolio manager Chris Versace said in a separate TheStreet Pro post after the FOMC released its quarterly “dot plot.”
This chart displays where each of its members forecasts what the Federal Funds Rate will be for the current year, the next two years, and the long term.
The Fed continues “to telegraph that two 25-basis point rate cuts remain on the table for this year,’’ Versace wrote.
The March 2025 dot plot projected two 0.25-percentage-point rate cuts this year, two more 0.25 points in 2026, and one 0.25 point in 2027. That was based on pre-tariff data.
More Federal Reserve:
- Fed interest rate cut decision resets forecasts for the rest of this year
- Federal Reserve prepares strong message on long-term interest rates
- Fed official revamps interest-rate cut forecast for this year
Powell repeatedly stayed on message during the press conference.
The overall economy is “solid,’’ but the uncertainty over inflation is driven by the lagging impact of President Donald Trump’s tariffs on prices, Powell said.
“Tariffs are a driving factor” for the holding pattern, he said. Tariff inflation, which could be temporary, has yet to show up in the nation’s supply chain.
Trump has given trading partners until July 9 to respond to the tariffs he announced on April 2, aka “Liberation Day.”
Market watchers and economists anticipated the hold.
The widely watched CME FedWatch tool now projects just an 11% rate cut to the Federal Funds Rate in July,
Trump, however, didn’t give up his demands that the Fed immediately slash rates by up to 2.0%.
In the process, he hurled a nasty array of personal insults at Powell and threatened to replace him before his term expires next year.
When asked to respond to the president’s comments, Powell deflected and said the central bank’s decisions are based on data.
That would not change, Powell indicated, noting the June rate decision was fully supported by the entire central bank board.
The Fed last cut the Federal Funds Rate in December 2024. It meets again July 29-30, 2025.