Fed Keeps Key Interest Rate Steady: Effects and Reactions
On June 18, 2025, the US Federal Reserve (Fed) decided to maintain the key interest rate at 4.25% to 4.50%. This decision was widely expected and reflects the Fed’s assessment that inflation, with a core rate of approximately 2.7%, has not yet declined sufficiently to justify interest rate cuts. At the same time, the Fed considers temporary effects due to tariff policy to be current.
Impacts on the Global Financial World
The prevailing interest rate level in the US influences capital flows and exchange rates worldwide. For investors in German-speaking countries, US investments may remain attractive as they offer higher returns compared to European options.
Consequences for Savers and Investors
As a result of stable US key interest rates, European interest rates may remain under pressure, rising only slowly. The stock markets reacted moderately positively to the Fed’s decision, as investors must reckon with a cautious stance from the Fed amidst unresolved inflation issues.
Political Context
US President Donald Trump sharply criticizes the Fed for the high interest rate level and calls for rate cuts. Despite political pressure, Fed Chairman Jerome Powell maintains an independent and data-dependent policy.
Summary
The Fed’s interest rate decision has far-reaching implications, signaling caution in light of existing inflation risks, influencing global capital markets, and keeping expectations regarding future interest rate cuts in suspense.