Fed holds key rate steady
Washington – on Wednesday, the federal reserve kept interest rates stable due to higher inflation and lower economic growth expectations, and still pointed to two discounts this year.
When the markets did not expect a chance of a Central Bank movement this week, the Federal Open Market Committee has kept the key borrowing rate in a range of 4.25-4.5%since December.
In addition to the ratio decision, the Committee said that the two cuts are still on the table until the end of 2025. However, for both 2026 and 2027, it eliminated a segment and put the expected future rate deductions on a four or full percentage point.
The land showed that the uncertainty about the future of ratios from the FED officials continued. Each point represents the expectations of an official for rates. There was a wide distribution on the matrix, a appearance pointed to a FED fund ratio in 2027.
Seven of the 19 participants stated that they did not want any deduction from four in March this year. However, the committee unanimously approved its policy statement.
The economic projections obtained from the meeting participants pointed to more stagflation pressure, the participants saw that the gross domestic product progressed at a rate of 1.4% in 2025 and inflation reached 3%.
GDP Estimation is falling
The revised forecasts from the last update in March represented a 0.3 percent point for GDP and a increase in the same amount for the price index for personal consumption expenditures. The core PCE, which eliminates food and energy prices, is foreseen 3.1%and 0.3 percent higher. Unemployment appearance received a revision higher than 4.5%or 0.1 percent higher than March and 0.3 points higher than the current level.
The FOMC statement changed very little from the May meeting. In general, he said the economy grew at a “low” unemployment and “slightly raised” inflation “at a solid speed”.
In addition, the Committee said that he was less concerned about the clouds of the economy and the clouds on the White House trade policy.
“The uncertainty about the economic perspective has decreased, but rose. The committee pays attention to risks for both sides of the bilateral duty.” He said.
“For now, we are in a good position to wait to learn more about the possible course of the economy before thinking about any regulation in our policies.” He said.
The US stocks were based on earnings after the announcement.
Trump pushes for ratio cuts
However, Trump’s discourse against the Fed was not softened.
Early on Wednesday, President Powell and his colleagues hit again because they did not alleviate. Trump said the FED fund rate should be at least two percent lower than two percentage points lower and reduce Powell as a “stupid” to prevent the interruption of the committee.
Fed officials were reluctant to act, fearing that Trump’s tariffs could cause inflation in the coming months this year. So far, price indicators have not shown that tasks have a lot of effect. In the nutrition of tariffs, a delay in the accumulation of stocks before the softening of consumer demand and the announcement of April 2 “Liberation Day” helped to deviate their effects.
The conflict between Israel and Iran adds another joker card to the policy mix, and higher energy prices expectations are a potential additional factor to prevent the FED from being cut off. The statement is ineffective from the Middle East war.
A slowly softening economy can provide incentives to cut later this year.
The latest labor market data shows that higher, long -term unemployment creeps are increased and consumers spend less. Retail sales fell by approximately 1% in May, and the latest data reflected a housing market and hit the lowest levels in five years.
However, for Trump, the importance of lower rates is due to the high cost that the government pays to finance the $ 36 trillion debt.
The interest of the debt is up to $ 1.2 trillion this year and exceeds all other budget items except Social Security and Medicare. In December, the Fed’s latest deduction and treasury returns were kept higher throughout the year and suppressed additional pressure on a budget deficit that may approach 2 trillion dollars or more than 6% of GDP.
Correction: Meeting participants expect the gross domestic product to progress at a rate of 1.4% in 2025. A previous version of the story misunderstood the year.
