US Federal Reserve Holds Interest Rates Steady, Defying Calls for Cuts Amid Economic Uncertainty
2025-06-19
The US Federal Reserve has chosen to keep interest rates unchanged, signaling a cautious stance despite growing political pressure and mixed economic signals.
The decision to maintain the federal funds target rate at its current range of 4.25% to 4.5% reflects the central bank’s ongoing concern over inflation and a slowing economy, while still acknowledging areas of strength like the labor market.
The move comes at a time when President Donald Trump has publicly criticized the Fed’s leadership, calling Jerome Powell, the Fed Chair he appointed in 2018, “stupid” and suggesting that the central bank is holding the country back economically by refusing to cut rates.
Despite the heated rhetoric, the Federal Reserve has reiterated its commitment to data-driven decision-making and maintaining independence from political influence.
Inflation Concerns and Tariffs Complicate Outlook
According to the Fed’s updated projections, inflation is expected to rise by a median of 3% in 2025—up from a previous forecast of 2.7%.
This adjustment reflects the Fed’s concern that the impact of tariffs and ongoing supply chain disruptions will push prices higher over the coming months.
Jerome Powell noted in a press conference that “increases in tariffs this year are likely to push up prices and weigh on economic activity.”
He also cautioned that while some inflationary effects may be temporary, others could persist, depending on how long trade restrictions last and how deeply they affect domestic prices.
The Federal Reserve also downgraded its forecast for economic growth. It now expects the US economy to grow by 1.4% in 2025, down from its previous projection of 1.7% in March and 2.1% in December.
This revision, coupled with the inflation outlook, makes the Fed hesitant to cut rates too quickly.
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A Divided Fed Faces an Uncertain Road
Although the Fed decided not to change interest rates for the fourth meeting in a row, internal divisions are growing.
The central bank’s closely watched “dot plot,” which charts the expectations of the 19 voting members, shows that while a majority predict at least two rate cuts in 2025, seven members expect no cuts at all.
“We have a pretty healthy diversity of views on the committee,” Powell stated, explaining that the disagreement stems from differences in economic modeling and risk tolerance. Despite this range of opinion, the consensus supports a cautious wait-and-see approach.
In its official statement, the Fed remarked that “uncertainty about the economic outlook has diminished but remains elevated,” emphasizing that future decisions will depend heavily on the incoming data.
Trump’s Attacks Highlight Fed Independence
Just hours before the decision was announced, Trump launched another personal attack on Powell, criticizing him for maintaining rates and implying that the central bank’s actions are politically motivated.
Trump, who has made it clear he wants to see rate cuts ahead of the 2024 election, suggested he would replace Powell after his term ends in May 2026.
Experts, however, have downplayed the impact of Trump’s remarks. Economist Paul Sheard said, “The Fed will just do its job,” noting that any future nomination by Trump would still need Senate confirmation.
Sheard emphasized the importance of central bank independence, especially in times of political tension.
What This Means for Consumers
With interest rates unchanged, the decision has immediate implications for consumers and markets. Mortgage rates are likely to remain elevated in the short term, as lenders often tie their rates closely to the fed funds target rate and bond yields.
According to the latest fed interest rates chart, mortgage rates today remain significantly higher than in previous years, reflecting the broader trend shown in the Federal Reserve interest rate history.
Investors also had a mixed reaction. Markets initially rose on the news of potential rate cuts in the future but later stabilized, with the S&P 500 and Dow Jones closing flat for the day.
When Is the Next Fed Interest Rate Decision?
The next interest rate decision is scheduled for July, and all eyes will be on whether the Fed will begin moving toward the rate cuts it has signaled for later in 2025. Much will depend on how inflation, employment, and GDP data evolve in the coming months.
Powell also expressed concern about cuts to funding for US statistical agencies, warning that reduced data quality could impair the Fed’s ability to make well-informed policy decisions.
“It is a real benefit to the general public,” he said, highlighting how crucial accurate economic data is for both the Fed and policymakers.
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Frequently Asked Questions (FAQ)
Q: What is the interest rate meaning?
A: An interest rate is the amount of money you pay or earn on a loan, deposit, or borrowed amount, calculated as a%age of the original sum (called the principal) over a specific period.
Q: Is 7% interest rate too high?
A: A 7% interest rate is considered average for a new car loan and below average for a used car loan. You're likely to get rates below 7% only if you're financing a new car and have a credit score above 660.
Q: Who is paying the highest interest rates now?
A: As of June 2025, some banks offering the highest interest rates on high-yield savings accounts include Varo Bank, Adelfi, and Fitness Bank (all at 5.00% APY), followed by Axos Bank (4.66% APY), Pibank (4.60% APY), and others.
Q: How to buy down interest rate?
A: The simplest way to reduce your mortgage interest rate is to buy "discount points." Each point costs 1.0% of your mortgage amount and lowers your interest rate by 0.25%.
Q: When interest rates are high?
A: When interest rates are high (rising), it means borrowing money becomes more expensive. This can slow down spending by both consumers and businesses, which can then reduce overall economic growth.
Disclaimer: The content of this article does not constitute financial or investment advice.
