The Federal Reserve (Fed) held interest rates steady Wednesday, maintaining its target range of 4.25%-4.5% amid concerns over inflation and slowing economic growth.
Despite expectations for two rate cuts later in 2025, officials scaled back their projections for reductions in 2026 and 2027, citing uncertainty in their economic outlook.
The central bank’s “dot plot” indicated broad disagreement among policymakers, with some projecting a fed funds rate around 3.4% by 2027. Seven of the 19 participants opposed cuts this year, an increase from March. Despite this divergence, the FOMC unanimously approved the policy statement.
Updated economic forecasts showed weaker growth and persistent inflation, with GDP expected to rise 1.4% in 2025 while core PCE inflation is projected at 3.1%. Unemployment is anticipated to edge up to 4.5%, signaling potential labor market cooling.
Fed Chair Jerome Powell emphasized patience in evaluating economic conditions before adjusting policy, noting that uncertainty has decreased but remains elevated. U.S. stocks maintained gains following the announcement.
President Donald Trump continued to criticize the Fed’s reluctance to cut rates, arguing that the fed funds rate should be significantly lower. His administration remains engaged in tariff negotiations, though officials are concerned about inflationary risks stemming from trade policies and geopolitical tensions.
Economic indicators point to weakening demand, rising layoffs, and declining retail sales, which could pressure the Fed to ease later in the year. Meanwhile, high government debt and elevated Treasury yields weigh on the administration’s fiscal priorities, adding to broader economic uncertainty.