Fed Holds Rates Steady, Signals Two Cuts Still Likely in 2025

Washington, D.C. —  The Federal Reserve left interest rates unchanged on Wednesday, keeping the benchmark federal funds rate in the 4.25% to 4.5% range, where it has remained since December. The decision came as the central bank signaled continued concern over inflation and slowing economic growth.

Despite holding steady for now, the Fed maintained its projection for two rate cuts later in the year, according to its updated “dot plot” of member forecasts. However, the outlook beyond 2025 was scaled back, with one fewer cut now expected in both 2026 and 2027.

The Fed’s economic projections suggest the U.S. economy will grow at a slower pace than previously anticipated. GDP is now forecast to rise just 1.4% in 2025, while core inflation is expected to reach 3.1%. Unemployment is projected to edge higher to 4.5%.

Federal Reserve Chair Jerome Powell said the committee is in no rush to act. “For the time being, we are well positioned to wait to learn more about the likely course of the economy before considering any adjustments,” Powell said at a press briefing.

Political pressure also loomed. Earlier in the day, former President Donald Trump sharply criticized Powell, demanding steeper cuts and calling him “stupid” for holding rates steady.

Market reaction was muted, with stocks hovering near the flatline after the announcement. Investors remain cautious amid persistent inflation risks, global conflicts, and the economic uncertainty surrounding tariffs and U.S. debt levels.

The Fed last cut rates in December 2024. Many now expect the central bank to wait until late Q3 before making its next move.