The Federal Reserve (FOMC) has maintained the interest rate range of 4.25% to 4.50% unchanged during its interest rate decision in June 2025. This aligned with the expectations of about 99.8% of market participants.
Inflation and Economic Growth
Fed Chair Jerome Powell emphasized during the press conference that inflation, with a core PCE rate of about 2.7%, has not yet fallen sufficiently to justify rate cuts. He also pointed to temporary effects from tariff policies as a factor influencing the decision. The Fed lowered its growth forecast for 2025 to about 1.4%, while predicting an unemployment rate of around 4.3% by the end of the year.
Market Reactions
The financial markets reacted somewhat cautiously positively to this decision: the S&P 500 rose by about 0.6%, the Dow Jones increased by approximately 0.4%, and the Nasdaq gained about 0.8%. However, analysts are divided on the future rate trajectory; some anticipate rate cuts in July or September of this year, while others expect a longer period of stable rates due to ongoing uncertainties from tariff measures.
Outlook and Dot Plot
The so-called Dot Plot – a forecast from all Fed members – indicates two rate cuts are expected this year, forecasting an interest rate between 3.75% and 4% by year-end. This reflects the assessment of slightly increased inflation alongside weaker economic growth.
In summary, the FOMC decision in June signals a phase of monetary policy continuity with a data-driven approach to the further development of the interest rate. The impacts on the financial markets are significant: a stable interest rate significantly influences borrowing costs and investment decisions, providing relative certainty in an environment of geopolitical uncertainties as well as economic challenges such as tariff policies and inflation trends.