The Federal Reserve on Wednesday said that it will leave its benchmark interest rate unchanged following its June monetary policy meeting as policymakers continue to monitor inflation and labor market data amid elevated economic uncertainty.
The central bank’s decision leaves the benchmark federal funds rate at a range of 4.25% to 4.5%.
It comes after the Fed left rates at that level at its three prior meetings in January, March and May. The central bank cut rates at its final three meetings last year, which involved a 50-basis-point cut in September and a pair of 25-basis-point reductions in November and December.
The Federal Open Market Committee (FOMC), which guides the central bank’s monetary policy moves, noted in its announcement that, “Although swings in net exports have affected the data, recent indicators suggest that economic activity has continued to expand at a solid pace.”
“The unemployment rate remains low, and labor market conditions remain solid. Inflation remains somewhat elevated,” the FOMC statement noted. Policymakers added that uncertainty about the economic outlook “has diminished but remains elevated” and that the Fed is “attentive to the risks to both sides of its dual mandate,” which is to pursue maximum employment and stable prices with long-run inflation at 2%.
FOMC policymakers also released a summary of economic projections, known as the so-called “dot plot,” which showed members see two interest rate cuts in 2025, followed by one cut each in 2026 and 2027.
They also project PCE inflation will rise to 3% this year before declining to 2.4% in 2026 and 2.1% the following year. Real gross domestic product (GDP) is seen as slowing to 1.4% in 2025 before growth picks up to 1.6% next year and 1.8% in 2027. Unemployment is seen as rising to 4.5% in 2025 and 2026, before dipping to 4.4% in 2027.
Federal Reserve Chair Jerome Powell said in remarks during a post-announcement press conference that “despite elevated uncertainty, the economy is in a solid position” as the “unemployment rate remains low and the labor market is at or near maximum employment. Inflation has come down a great deal, but has been running somewhat above our 2% longer-run objective.”
He added that the Fed’s “current stance of monetary policy leaves us well positioned to respond in a timely way to potential economic developments.”
Powell also discussed policymakers’ views into how tariffs implemented by the Trump administration will impact inflation, explaining that, “The effects of tariffs will depend, among other things, on their ultimate level. Expectations of that level and thus, of the related economic effects, reached a peak in April and have since declined. Even so, increases in tariffs this year are likely to push up prices and weigh on economic activity.”
“The effects on inflation could be short-lived, reflecting a one-time shift in the price level. It’s also possible that inflationary effects could instead be more persistent,” he added. “Avoiding that outcome will depend on the size of the tariff effects, on how long it takes for them to pass through fully into prices, and ultimately on keeping longer-term inflation expectations well-anchored.”
The Fed chair was asked about the timing of the impact of tariffs on inflation data, which has been limited to date amid the administration’s delays to some tariffs.
“We’ve had three months of favorable inflation readings since the high readings of January and February, and that’s, of course, highly welcome news,” Powell said, noting that services inflation have trended down. “We’ve had inflation goods just moving a bit… we do expect to see more of that over the course of the summer.”
“It takes some time for tariffs to work their way through the chain of distribution to the end consumer. A good example of that would be goods being sold at retailers today may have been imported several months ago before tariffs were imposed. So we’re beginning to see some effects, and we do expect to see more of them over the coming months,” he explained.
“Many companies do expect to put all – some or all of the effect of tariffs through to the next person in the chain and ultimately to the consumer,” Powell said.
President Donald Trump has repeatedly criticized Powell and the Fed for not lowering interest rates, including comments Wednesday calling Powell “a stupid person.”
The chair declined to weigh in on Trump’s comments and said that he and the FOMC are focused on facilitating “a good, solid American economy with a strong labor market and price stability.” He also said he’s focused solely on monetary policy and not whether he will continue to serve as a Fed governor if the president, as expected, opts against reappointing him to another term as chair.
This is a developing story. Please check back for updates.
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