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In an expected but message-laden move, the US Federal Reserve (Fed) decided to keep interest rates unchanged for the fourth consecutive meeting, keeping the benchmark interest rate between 4.25% and 4.5% , the highest levels in years, and reaffirming its cautious strategy amid a world torn by geopolitical and trade factors.
But behind this apparent stability, a more complex story is brewing. As investors hold their breath, anticipating the Fed’s direction regarding a potential rate cut, the message is twofold: Yes, we expect two cuts in 2025… but we are deeply divided on that .
Internal division… and exposure to inflation
Eight policymakers expect two cuts this year, while seven see none at all, a rare sign of division within the Federal Open Market Committee (FOMC). Expectations for cuts in 2026 and 2027 were also lowered, suggesting that the period of higher interest rates may be longer than previously thought. In contrast, the Fed softened its official tone on future risks, removing the previous reference that “the risks of higher unemployment and inflation have increased” and stating that “the level of uncertainty about the economy remains elevated, albeit lower than in the past.”
Although inflation appears to be declining, the Fed raised its forecast for core personal expenditures (PCE) to 3.1% for 2025, up from 2.8% previously. It also lowered its economic growth estimate to 1.4% from 1.7%, and raised the expected unemployment rate to 4.5% .
Powell: “We are anticipating the repercussions of the tariffs”… and hints at summer
At the press conference following the decision, Federal Reserve Chairman Jerome Powell appeared calm but cautious, stressing that the Fed is still awaiting the outcome of the Trump administration’s new tariffs , which have already begun to impact commodity prices.
“We are beginning to see some effects, and we expect more in the coming months,” Powell said. “The responsible thing to do now is to stay in our positions and monitor the data closely.”
Trump presses… Powell responds: “The only thing we care about is the economy.”
But this federal calm did not prevent a political storm from brewing on the horizon. President Donald Trump recently escalated his rhetoric against Powell, accusing him of being late, saying sarcastically:
“I call him a late Powell… Maybe I should go to the Fed myself, I’d do a much better job.” Trump is demanding an immediate interest rate cut, citing slowing inflation and a successful economy, describing the current situation by saying, “There’s no inflation… We’re just having success. I want to see rates come down.”
When asked about political pressure, Powell replied, “We’re just focused on building a strong economy. That’s all we care about.”
What does this mean for investors?
- Holding interest rates steady doesn’t mean the end of tightening: The Fed doesn’t see a need to raise interest rates, but it also doesn’t see a strong justification for cutting them at this time. Markets will remain under pressure until further notice.
- Committee divisions increase volatility: The sharp disagreement among Fed members means that upcoming economic data, such as inflation and employment figures, will have the final say. Each report becomes a tool for resolving internal conflict.
- Tariffs Enter Monetary Policy: For the first time in years, trade policy is once again directly influencing Fed decisions, increasing uncertainty around inflation.
- Trump and the Federal Reserve… An old battle renewed: Trump’s statements pour oil on the markets’ fire, and we may witness further escalation if the Federal Reserve ignores calls for a rate cut during the summer.
In conclusion: A summer of waiting… and anxiety.
The Fed may have decided not to act this month, but markets, investors, and even politicians are already on the move. They’re all waiting to see what the upcoming figures will say and when the first rate cut will be announced… if it happens at all. Between divided members, unyielding inflation, and a US president pushing from all sides, the coming months look like a frenetic summer for the US economy.
