Fed Holds Rates Steady, Bond Market May Need Easing: Sage Advisory

The Federal Reserve held interest rates steady at 4.25%-4.50% in June, with Chair Jerome Powell signaling no urgency for rate cuts. Sage Advisory's Thomas Urano believes the equity market may not require rate cuts, but the bond market could benefit from easing to move higher. The 10-year Treasury yield currently trades at 4.37%, and Urano expects it to remain between 4% and 4.5% for an extended period.

The Federal Reserve has maintained its benchmark interest rate in the 4.25% to 4.5% range, resisting political pressure for cuts while signaling a more inflationary environment ahead [1]. This decision, announced on June 18, reflects the central bank's cautious approach to economic policy.

The Fed's latest projections indicate that inflation, as measured by the Personal Consumption Expenditures Price Index, is expected to rise to 3% in 2025, up from an earlier forecast of 2.7% [1]. Simultaneously, gross domestic product (GDP) growth is projected to slow to 1.4%, and unemployment is expected to rise beyond expectations, although by a 0.3% difference [1].

The Federal Reserve Chair, Jerome Powell, stated that the central bank is well-positioned to wait and learn more about the economy before considering any adjustments to its policy stance [1]. Powell's remarks came amidst a backdrop of growing economic headwinds, including a weakening labor market, decreasing retail activity, and increasing jobless claims [1].

The decision to hold rates steady contrasts with President Donald Trump's demand for lower interest rates, as he criticized Powell for not lowering rates to 1%–2% [2]. Trump has argued that such a move would save the United States up to $1 trillion dollars per year [2].

Rep. Thomas Massie (R-Ky.) has reinforced concerns about the central bank's fading influence, suggesting that the Fed has lost its ability to "set rates" due to unchecked congressional spending [2]. Massie has introduced legislation seeking to dismantle the central bank entirely [2].

The Federal Reserve's cautious stance has also been influenced by the withdrawal of U.S. Treasuries by over 200 central banks and foreign entities from the New York Federal Reserve, signaling potential concerns over the stability of the U.S. dollar [3]. This trend has led to a significant reduction in foreign participation in the Treasury market, potentially impacting interest rates across the economy [3].

Sage Advisory's Thomas Urano believes that the equity market may not require rate cuts, but the bond market could benefit from easing to move higher [4]. The 10-year Treasury yield currently trades at 4.37%, and Urano expects it to remain between 4% and 4.5% for an extended period [4].

In conclusion, the Federal Reserve's decision to hold rates steady reflects its concern about inflationary pressures and the need to stabilize the economy. The political and economic landscape continues to evolve, with various stakeholders offering differing views on the appropriate monetary policy stance.

References:
[1] https://www.marca.com/en/lifestyle/us-news/personal-finance/2025/06/19/685406ef46163fa39f8b45c8.html
[2] https://api.news.bitcoin.com/wp-json/bcn/v1/post?slug=interest-rate-showdown-trump-vs-powell-massie-vs-the-fed
[3] https://finance.yahoo.com/news/over-200-central-banks-reportedly-033027304.html
[4] https://www.sageadvisory.com/