Fed Expected to Keep Rates Unchanged at 4.25% to 4.50% Range

The Federal Reserve is expected to keep its benchmark interest rate unchanged within the 4.25% to 4.50% range during its upcoming meeting. This decision is in line with the Fed's cautious approach, which has been consistent throughout the first half of 2025. The Fed has held off on cutting rates since December, citing uncertainty around the potential impact of economic policies. The current economic landscape shows a mixed picture: while consumer sentiment has improved, inflation ticked up slightly to 2.4% in May, and job growth, though slowing, continues to exceed expectations.

The Federal Open Market Committee (FOMC) will convene on June 17-18, with the decision to be announced on Wednesday, June 18, at 2 p.m. EST. Following the announcement, Fed Chair Jerome Powell will hold a press conference at 2:30 p.m. to discuss the committee's decision and provide an economic forecast. The forecast will include projections on how interest rates are expected to change in the coming years. One key aspect to watch will be the unanimity of the decision, as any dissent from voting members could signal a shift in the Fed's stance.

Economists predict a 97.5% probability that the Fed will maintain its benchmark rate at the current range. The last rate reduction occurred in December 2024, when the Fed cut rates by 0.25 percentage points. The decision to hold rates steady may be unwelcome for borrowers but beneficial for savers who benefit from higher interest rates. This moment could also be opportune for paying down high-cost credit card debt and bolstering emergency savings. If the Fed holds steady, Americans can expect credit card rates, auto loans, and mortgages to remain high, with the 30-year fixed mortgage rate hovering around 7% and credit card rates exceeding 20%.

The Fed's decision will also be closely watched for its implications on the future outlook for interest rates and inflation trends. The Fed's prior projection of two rate cuts this year will be scrutinized, as will the political pressure that has influenced economic policies. The Fed's inflation fight is far from over, with expectations that 10-year yields will remain within the 3.5% to 5% range. The Fed's cautious approach reflects its commitment to monitoring the economic outlook amidst increased uncertainty, ensuring that any policy adjustments are well-considered and aligned with long-term economic stability.

In March, most FOMC members reported expecting interest rates to land at 3.75–4% by the end of 2025. With the current rate being 4.25–4.5%, this means committee members expected two 25 basis point cuts (or one 50bps decrease) by December. However, the first few post-Liberation Day inflation data points have come in milder than committee members had expected. Even so, should the market’s expectations for inflation increase, the Fed is going to get concerned. When businesses and consumers expect prices to rise, it’s like a self-fulfilling prophecy.

Chair Powell is likely in his final lap as head of the Fed. His term ends on May 23, 2026, and based on past comments, it is doubtful that Powell will be renominated. There are eight FOMC meetings between now and Powell’s presumed departure. Historically, outgoing Fed Chairs tended to spend their final year being more hawkish. Janet Yellen raised rates three times in the last 12 months of her term. Alan Greenspan, whose final year as Chair was in 2005, issued four hikes. Of course, these were during times of stable growth and low inflation. In Powell’s case, the most hawkish move of all would be to raise rates this year. However, it is widely expected that this will not happen. What he might do instead, which would still be fairly hawkish, would be to delay rate cuts. “Higher for longer.”