The Federal Reserve keeps interest rates unchanged, still expecting to cut rates twice in 2025

FX168 Financial News (North America) reported that on Wednesday (June 18), the Federal Reserve decided to keep interest rates unchanged for the fourth consecutive meeting and continues to maintain expectations for two rate cuts within the year.The Federal Reserve unanimously voted to keep its benchmark interest rate in the range of 4.25%-4.5%. This rate level has been maintained for six months since the last rate cut in December of last year.Despite the ongoing uncertainties regarding tariffs, immigration, and tax policies under the Trump administration, Federal Reserve officials still expect two rate cuts this year, consistent with the forecast made in March.However, against the backdrop of these uncertainties, the Federal Reserve has adjusted its expectations for inflation and economic growth. Officials now anticipate that inflation this year will be higher than previously estimated, while economic growth will be lower than originally predicted.They forecast that the core Personal Consumption Expenditures (PCE) inflation rate will reach 3.1%, up from the previous estimate of 2.8%. However, they expect this indicator to drop to 2.4% by 2026. They also stated that recent indicators show that economic activity continues to expand at a robust pace.The annual growth rate of the U.S. economy is currently projected to be 1.4%, down from the previous forecast of 1.7%; the long-term growth expectation is 1.8%, unchanged from the March forecast; the unemployment rate is expected to rise slightly to 4.5%, up from the previous estimate of 4.4%.Although officials believe that uncertainty still exists, they stated that risks have somewhat eased."The uncertainty regarding the economic outlook has diminished but remains at a high level," the policy statement read. This wording represents a shift from the previous statement that "uncertainty regarding the economic outlook has further increased."The Federal Reserve indicated that they are still focused on the risks associated with their "dual mandate," but this time they removed the previous wording about "the rising risks of high unemployment and high inflation."Regarding interest rate path expectations, out of 19 officials, 8 supported two rate cuts this year, 7 believed that rates should not be cut this year, 2 supported one rate cut, and another 2 advocated for three rate cuts. A 25 basis point cut is expected in both 2026 and 2027.Despite recent inflation data showing moderate price increases and the full implementation of tariff policies, the Federal Reserve still retained the statement that "inflation remains slightly elevated" in its policy statement.This decision to maintain interest rates unchanged is unlikely to satisfy Trump. He has recently called on Federal Reserve Chairman Jerome Powell to cut rates both publicly and privately, even stating last week that he "may have to take action forcefully."Before the Federal Reserve announced its rate decision, Trump again expressed his dissatisfaction with Powell to reporters."I call him 'Always Too Late Powell' because he always reacts too slowly," Trump said, adding, "I think he hates me," even joking about taking a position at the Federal Reserve himself."Maybe I should go to the Federal Reserve; I would do a much better job."Trump has consistently demanded that the Federal Reserve cut rates based on declining inflation, and he reiterated this point again on Wednesday."We have no inflation; we only have success," Trump stated. "I want to see rates lowered."However, Powell and several Federal Reserve policymakers have made it clear in recent weeks that when weighing their dual mandate, they are currently more concerned about the inflationary risks that Trump's tariff policy may bring, rather than the possibility of rising unemployment.Key points summarized below.The chart of economic expectations from the Federal Reserve shows that most FOMC participants believe there is greater uncertainty regarding the unemployment rate, with risks skewed to the upside. Most FOMC participants also believe there is greater uncertainty regarding real GDP, with risks skewed to the downside.FOMC Economic Expectations:The median core PCE inflation expectations for the end of 2025, 2026, and 2027 are 3.1%, 2.4%, and 2.1%, respectively. (March expectations were 2.8%, 2.2%, and 2.0%)The median PCE inflation expectations for the end of 2025, 2026, and 2027 are 3.0%, 2.4%, and 2.1%, respectively. (March expectations were 2.7%, 2.2%, and 2.0%)The median unemployment rate expectations for the end of 2025, 2026, and 2027 are 4.5%, 4.5%, and 4.4%, respectively. (March expectations were 4.4%, 4.3%, and 4.3%)The median GDP growth rate expectations for the end of 2025, 2026, and 2027 are 1.4%, 1.6%, and 1.8%, respectively. (March expectations were 1.7%, 1.8%, and 1.8%)The median expectations for the federal funds rate at the end of 2025, 2026, and 2027, and the long term are 3.9%, 3.6%, 3.4%, and 3.0%, respectively. (March expectations were 3.9%, 3.4%, 3.1%, and 3.0%)