Fed Holds Rates Steady, Tees Up Possible Cuts as Inflation Progress Slows
The Federal Reserve hit pause once again. On June 18, 2025, the Fed voted unanimously to keep its benchmark interest rate steady at 5.25%–5.50%, marking the seventh consecutive hold.
While no rate cut has materialized just yet, the message was clear. The central bank sees a path to easing later this year, but only if inflation shows more meaningful improvement.
The Fed’s updated projections and tone signal that policymakers are growing more cautious and divided about how to balance economic resilience with stubborn inflation.
Fed Signals Two Cuts on the Table for 2025
The Fed’s updated “dot plot” revealed a split outlook for rate cuts this year: 8–10 officials expect two quarter-point cuts, while 7 expect none. Fed Chair Jerome Powell offered a careful recalibration during his post-meeting press conference.
“We’ve made considerable progress, but inflation remains elevated,” Powell said. “We need to see more good inflation data to bolster confidence before adjusting policy.”
Translation? The Fed’s finger is hovering near the rate-cut trigger, but it won’t pull unless the next few CPI reports say “go.”
Inflation Ticks Higher, Growth Slows Down
The Fed’s latest projections reveal a story we’ve heard before: inflation is cooling, but not fast enough, and growth is starting to drag.
Core inflation: expected to average 2.8% in 2025, higher than previous projections.
Long-term inflation forecast: increased to 3.0%, reflecting ongoing price pressures in sectors like housing and energy.
GDP growth: reduced to 1.4%, signaling that higher borrowing costs are finally catching up with consumers and businesses.
Unemployment: projected to increase to 4.5% by year-end, a sign of the labor market softening but not collapse.
Markets Jitter, Then Recalibrate
Traders digested the Fed’s remarks in real-time. Stocks seesawed as Powell spoke, with the Dow slipping slightly while bond yields edged higher on the inflation revisions.
Fed funds futures now price in a 60–70% chance of a cut by September, assuming economic data trends the right way. But as we’ve learned over the last two years, what the Fed signals in June can look very different by fall.
Trump Turns Up the Heat, Fed Stays Cool
President Donald Trump has stepped up public pressure on the Fed, blaming “high interest rates” for slowing growth and urging a shift toward more aggressive cuts.
But Powell remains rock-solid. In a recent 60 Minutes interview, he emphasized the Fed’s independence:
“We do not consider politics in our decisions. We never do and we never will.”
What It Means for Everyday Americans
Borrowers: Don’t expect rate relief overnight. Mortgage rates, credit card APRs, and auto loan rates will remain elevated until the Fed starts cutting, which is likely to be fall or winter at the earliest.
Savers: Enjoy those high-yield CDs and savings accounts while they last. If the Fed begins easing, yields on deposit products could start to slide heading into 2026.
Investors: The market sees light at the end of the tunnel, but it’s a long tunnel. Stay tuned to inflation reports, jobs data, and Powell’s Jackson Hole speech in August.
The Fed didn’t deliver a rate cut, but it offered something almost as valuable: clarity. The path to rate relief is now visible, though not guaranteed.
The tone is now more flexible, the outlook more cautious, and the policy stance is more open-ended than at any point in the last 12 months. If inflation finally gives way, we’ll see the first cuts in this cycle.
Until then, the Fed is standing still, just close enough to the edge to see what comes next.
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