The Federal Reserve on Wednesday left interest rates unchanged, citing elevated inflation and slowing economic growth, while maintaining its projection for two rate cuts by the end of 2025.
As widely anticipated, the Federal Open Market Committee (FOMC) kept the benchmark borrowing rate steady in a target range of 4.25% to 4.5%, a level it has held since December.
Alongside the decision, the Fed released its updated “dot plot,” which reflected a slightly more hawkish stance on the longer-term rate outlook. While two cuts remain projected for this year, the committee removed one reduction each from its 2026 and 2027 forecasts, now anticipating four total cuts—or a full percentage point—through 2027.
The dot plot revealed considerable uncertainty among Fed officials, with wide-ranging views on the future path of rates. The matrix pointed to a median fed funds rate of around 3.4% by 2027. Notably, seven of the 19 officials now expect no rate cuts in 2025, up from four in March. Still, the committee unanimously approved the policy statement.
Economic projections reflected stagflationary pressures ahead. Participants now expect gross domestic product (GDP) growth of just 1.4% in 2025, with inflation reaching 3%. These figures mark a downward revision of 0.3 percentage points for GDP and an upward revision of 0.3 points for the personal consumption expenditures (PCE) price index since March. Core PCE, which strips out food and energy prices, was revised up to 3.1%.
The unemployment forecast also rose slightly to 4.5%, up 0.1 percentage point from March and 0.3 points above the current level.
The FOMC statement itself remained largely consistent with that of the May meeting. It said the U.S. economy continues to grow at a “solid pace,” with “low” unemployment and “somewhat elevated” inflation.
“Uncertainty about the economic outlook has diminished but remains elevated. The Committee is attentive to the risks to both sides of its dual mandate,” the statement noted. Officials also showed less concern over volatility in the economy and the policy direction from the White House.
During a press conference following the decision, Federal Reserve Chair Jerome Powell said the Fed would take a wait-and-see approach: “For the time being, we are well positioned to wait to learn more about the likely course of the economy before considering any adjustments to our policies,” Powell said.
Markets showed little movement following the announcement, with U.S. stocks trading near the flatline.
The Fed’s statement did not go into detail about why its outlook for uncertainty had diminished, but the shift comes as President Donald Trump has moderated his tone on trade. The White House is currently in a 90-day negotiation window on tariff policy.
However, Trump’s criticism of the Fed remains strong. Earlier Wednesday, the president again attacked Powell and the central bank for refusing to cut rates. Trump said the federal funds rate should be at least two percentage points lower and derided Powell as “stupid” for not advocating cuts.
Fed officials remain cautious about inflation risks tied to tariffs imposed earlier this year, which have not yet shown significant price impact. A combination of softening consumer demand and stockpiling ahead of the April 2 “liberation day” has, so far, helped absorb the pressure from those trade measures.
