On June 18, 2025, the US Federal Reserve, known as the Fed, announced its decision to keep the key interest rate unchanged in the range of 4.25 to 4.50 percent. This decision aligned with market expectations and occurred despite pressure from President Donald Trump for a rate cut.
Impact on Financial Markets
The stability of interest rates has significant effects on international financial markets. It directly influences the conditions for loans and the yields of various investments.
- Loan Conditions: High interest rates lead to more expensive loans, which can reduce demand and impact both consumption and investment.
- Investment Yields: Stable interest rates mean constant returns, which savers appreciate as it provides them with planning certainty.
Forecasts for Future Rate Cuts
Although interest rates currently remain stable, the Fed signals possible rate cuts in 2025, contingent on economic developments. Economists, including Preston Caldwell from Morningstar, expect a cut in July and another one by the end of the year. Michael Feroli from JP Morgan, on the other hand, sees no cuts before December.
Political Influences and Economic Uncertainty
The Fed’s decisions are often the subject of political debates. President Trump has repeatedly called for rate cuts and has criticized Fed Chairman Jerome Powell. The Fed emphasizes that while the risk of economic uncertainty has decreased, it remains high, which could influence future decisions.
Overall, the Fed’s interest rate policy remains a crucial factor for the international economy and the financial markets. The current decision reflects the Fed’s cautious stance as it prepares for future adjustments.