The Federal Reserve held interest rates steady on Wednesday for the fourth consecutive meeting, keeping its benchmark rate in the range of 4.25% to 4.5% and reaffirming its forecast for two interest rate cuts before the end of 2025. The decision, which was supported unanimously by the Federal Open Market Committee, underscores the central bank’s cautious approach as it navigates a complex economic environment shaped by persistent inflation, slower growth expectations, and growing political pressure from the Trump administration.
Despite recent signs that inflation has eased modestly, the Fed raised its inflation outlook for the year. Officials now expect core PCE inflation, the central bank’s preferred metric, to end 2025 at 3.1%, up from a previous estimate of 2.8%. That adjustment reflects concerns that tariffs and other policy shifts under President Trump’s administration may continue to elevate prices and complicate the Fed’s path to achieving its 2% inflation target. At the same time, economic growth projections were lowered, with the Fed now anticipating annual GDP growth of 1.4%, down from 1.7%. The unemployment rate is also expected to climb slightly, from 4.4% to 4.5%, signaling a potential slowdown in the labor market as higher borrowing costs weigh on hiring and business investment.
The Fed’s statement noted that “uncertainty about the economic outlook has diminished, but remains elevated,” marking a shift in tone from earlier warnings that uncertainty was rising. While this change suggests that some risks may be stabilizing, policymakers remain sharply divided over the appropriate course of action. Eight officials project two rate cuts this year, while seven expect no cuts at all. Two members see a single cut, and two others anticipate as many as three. This internal split reflects the complexity of balancing inflation management with support for economic growth, particularly in a volatile political climate.
President Trump, who has been increasingly vocal in his criticism of Fed Chair Jerome Powell, once again expressed dissatisfaction with the central bank’s approach. Hours before the rate announcement, Trump took aim at Powell in front of reporters, joking that he might appoint himself to the Fed, claiming, “Maybe I should go to the Fed; I’d do a much better job.” He continued his push for lower rates by declaring that inflation is no longer a concern, stating, “We have no inflation, we have only success.” This political pressure has not gone unnoticed, but Powell and other Fed officials appear focused on maintaining their independence and credibility by anchoring decisions in economic data rather than political narratives.
Markets responded calmly to the announcement, with the S&P 500 rising 0.18% and the Dow Jones Industrial Average gaining 0.21%. Investors largely interpreted the Fed’s decision as a sign that rate cuts remain on the table, just not at the pace the White House may want. For now, the Fed continues to walk a careful line, seeking to bring inflation down without derailing a fragile recovery. With just months left in the year and political tensions rising, all eyes will remain on Powell and the FOMC as they weigh their next move.