This week, the interest rate decision of the Federal Reserve (Fed) is in the spotlight. The rate decision can have significant impacts on market developments and the capital markets. Here are the key aspects related to the upcoming rate decision:
Next Fed Meeting
- Date and Time: The next Fed meeting will take place on June 18, 2025. The interest rate decision will be announced at 8:00 PM, followed by a press conference with Fed Chair Jay Powell at 8:30 PM.
- Probability of a Rate Pause: The probability of another rate pause is reported at 99.9%, based on the FedWatch Tool data from June 10, 2025.
Current Economic Situation
- Economic Growth: Current indicators suggest continued solid economic growth, despite fluctuations in net exports.
- Labor Market: The unemployment rate has stabilized at a low level, and labor market conditions remain solid.
- Inflation: Inflation remains slightly elevated, which could influence the Fed’s decision-making.
Fed’s Objectives
- Maximum Employment and 2% Inflation: The Fed aims for maximum employment and 2% inflation in the long term. The committee is aware of the risks on both sides of its dual mandate and carefully examines the risks of higher unemployment and higher inflation.
- Current Interest Rate Range: The target corridor for the key interest rate remains at 4.25 to 4.50%, as decided in the last meeting in May 2025.
Impact on Markets
- Market Expectations: The markets do not expect any change in the key interest rate, which is reflected in the current market preferences.
- Market Reactions: Market reactions to the interest rate decision can vary widely, depending on expectations and the Fed’s actual decision. A rate pause could lead to market stabilization, while an unexpected interest rate change could result in greater volatility.
Comparison with Other Central Banks
The European Central Bank (ECB) recently lowered its key interest rates by 0.25% on June 5, 2025, indicating progressing disinflation and increasing economic risks. This could contrast with expectations around the Fed’s interest rate decision.
In summary, the Fed’s interest rate decision on June 18, 2025, will attract significant attention and could substantially influence market developments. The markets expect a rate pause, which could support market stability.