US Federal Reserve Maintains Interest Rates Amid Economic Uncertainty

The US Federal Reserve has decided to maintain its benchmark interest rates at 4.25-4.50% for the fourth consecutive meeting. Chairman Jerome Powell emphasized the importance of this decision in supporting maximum employment and stable inflation. The Fed's economic projections indicate a slight decline in GDP growth estimates, while inflation remains above the target. The Fed is closely monitoring economic developments and uncertainties surrounding trade and tariffs, which could impact future rate decisions. This article delves into the Fed's current stance and future outlook.

By Narendra Chaudhary Jun 19, 2025, 10:10 IST

US Fed's Decision on Interest Rates

On Thursday morning (IST), the US Federal Reserve opted to keep its benchmark interest rates steady at 4.25-4.50% for the fourth consecutive meeting, reflecting a cautious approach in light of changing economic conditions. Jerome Powell, the Chairman of the Federal Reserve, stated that this decision aims to support the Fed's dual objectives of achieving maximum employment and maintaining stable inflation.

Powell remarked, "To support our goals, the Federal Open Market Committee has decided to maintain our policy interest rate. We believe our current monetary policy stance positions us well to respond promptly to any economic developments that may arise."

In its statement, the Federal Open Market Committee (FOMC) indicated that it will continue to evaluate incoming data, the economic outlook, and the associated risks before making any further adjustments to interest rates.

The Fed's Summary of Economic Projections (SEP) revealed that the median forecast for GDP growth is 1.4% for this year and 1.6% for the next, slightly lower than previous estimates made in March.

Last year, the US economy expanded by 2.5%, but GDP experienced a slight decline in the first quarter due to an increase in imports ahead of potential tariffs, complicating GDP calculations.

However, private domestic final purchases (PDFP), which exclude net exports, inventories, and government spending, increased at a robust rate of 2.5% in the first quarter. Regarding inflation, Powell noted that while price pressures have diminished since their peak in mid-2022, inflation remains above the Fed's target of 2%. The median projection anticipates inflation to decrease to 2.4% by 2026 and 2.1% by 2027.

Future Outlook for the US Fed

The Fed also recognized the uncertainties surrounding trade, immigration, fiscal policies, and regulatory changes, noting that developments related to tariffs could continue to influence both inflation and economic growth.

Powell stated, "The impact of tariffs will depend on their final levels. Expectations regarding these levels peaked in April but have since declined. Nevertheless, any increases in tariffs this year are likely to elevate prices and hinder economic activity."

Despite a decrease in tariff level expectations since April, recent hikes are still anticipated to raise prices and slow economic growth. Looking ahead, the SEP indicates a median projection for the federal funds rate of 3.9% by the end of 2025, 3.6% by the end of 2026, and 3.4% in 2027, slightly above earlier forecasts.

Powell concluded by stating that the Fed is well-positioned to observe how the economy develops before making any decisions regarding future rate adjustments.