TLDR
- Federal Reserve kept interest rates unchanged at June meeting while maintaining forecast for two rate cuts in 2025
- Fed officials raised inflation forecast to 3.1% for 2025, up from 2.8% in March, citing expected tariff impacts
- Chair Jerome Powell said tariffs will likely push inflation higher as businesses pass along increased costs to consumers
- Economic growth projections were lowered while unemployment is expected to rise slightly, creating potential stagflation concerns
- Seven of 19 Fed policymakers now forecast no rate cuts at all this year, showing increased division within the committee
The Federal Reserve maintained its current interest rate policy at Wednesday’s June meeting. The central bank kept rates unchanged while projecting two cuts for 2025.
Chair Jerome Powell addressed tariff impacts during his press conference. He stated that everyone he knows forecasts higher inflation from tariffs in coming months.
The Fed’s updated economic projections reflect growing concerns. Core PCE inflation forecasts rose to 3.1% for 2025, up from the March projection of 2.8%.
Tariff Uncertainty Shapes Fed Outlook
Powell emphasized the uncertainty surrounding tariff policy. He said the size, effect, and duration of tariffs remain highly uncertain.
🚨 FOMC recap:
🔹 Fed holds steady at 4.25–4.5%, but still signals 2 rate cuts in 2025.
🔹 Inflation & growth outlook worsens. Dot plot shows a more divided FOMC, with 7 members seeing no cuts.
🔹 Powell says they’re “waiting for clarity.”
📉 US Futures are down in the… pic.twitter.com/xXGK0KxAiA
— Trader Edge (@Pro_Trader_Edge) June 19, 2025
The Fed chairman noted that tariffs will be substantially larger than forecasters previously expected. Business sentiment appears to be improving despite these challenges.
Officials expect economic growth to slow while unemployment rises slightly. This combination creates potential stagflation conditions where growth slows and prices increase.
Powell pushed back against stagflation concerns. He said he wasn’t necessarily expecting an economic slowdown in the second half of the year.
The dot plot showing individual rate projections reveals internal division. Seven of 19 Fed policymakers now forecast no rate cuts at all this year.
This represents a shift from March when fewer officials expected zero cuts. The median forecast still shows two cuts but holds by a narrow margin.
Fed Balances Competing Pressures
Powell acknowledged the fragility of current projections. He said no one holds rate paths with great conviction given the uncertainty.
The Fed chair defended the economy’s current health. He highlighted historically low unemployment and inflation moving in the right direction.
Unemployment remains at 4.2% while real wages continue rising. Recent data shows consumer demand and business investment staying resilient.
Powell called it a solid economy that allows policymakers time to gather information. The Fed appears to be balancing near-term inflation risks with market expectations for rate cuts.
Economists note the Fed’s challenging position. ING economists wrote that forecasts are meaningless given economic and political uncertainty.
The central bank faces pressure to be decisive. RSM’s chief economist said a policy trying to please everyone cannot endure long.
Inflation expectations remain well-anchored for now. Powell acknowledged that confidence isn’t the same as certainty regarding tariff impacts.
The Fed continues its wait-and-see approach while monitoring economic data. Officials plan to absorb new information before making policy changes.
Stay Ahead of the Market with Benzinga Pro!
Want to trade like a pro? Benzinga Pro gives you the edge you need in today's fast-paced markets. Get real-time news, exclusive insights, and powerful tools trusted by professional traders:
- Breaking market-moving stories before they hit mainstream media
- Live audio squawk for hands-free market updates
- Advanced stock scanner to spot promising trades
- Expert trade ideas and on-demand support
