The Federal Reserve (Fed) decided on June 18, 2025, to keep the interest rate unchanged in the range of 4.25% to 4.50%. This decision had been anticipated by almost all market participants and represents the fourth consecutive pause on interest rates.
Significance of the Decision for Private Investors and Savers
Loan Costs
The unchanged interest rate means that the costs of loans will remain at the current level. For private borrowers, this means that mortgage rates, consumer loans, or other financing will not become cheaper. This directly impacts spending and investment decisions.
Market Development
The financial markets reacted slightly positively: the S&P 500 increased by about 0.6%, the Dow Jones by 0.4%, and the Nasdaq by approximately 0.8%. However, the Fed continued to emphasize that inflation (PCE core inflation at about 2.7%) has not yet decreased sufficiently as a reason against interest rate cuts at this time.
Investment Strategies in the German-speaking Area
As many German and Austrian investors also diversify internationally or monitor and invest in US markets (e.g., via ETFs), the Fed’s decision indirectly influences their strategies:
- Fixed-Income Investments: Remain attractive compared to riskier investments as long as there are no interest rate cuts.
- Stock Markets: The slight recovery after the announcement shows opportunities for stock investments despite a cautious stance.
- Currency Risks: A stable US interest rate can stabilize or strengthen the dollar against the euro; this is relevant for investors with USD investments.
Outlook
The Fed signaled in its forecast (“Dot Plot”) that two interest rate cuts are possible in 2025 – likely in July or September – provided that the inflation situation continues to ease. However, Jerome Powell remains data-dependent and highlights “temporary” effects due to tariff policies.
Moreover, there is political pressure from former President Trump, who demands a stronger cut in the interest rate; however, this has so far been ignored by the Fed.
In summary, it can be noted: The Fed’s decision to maintain the interest rate keeps loan costs stable and results in a cautious market sentiment with moderate upward potential in the stock markets. For private investors and savers in the German-speaking area, this primarily means continued stable financing costs and an environment with moderate return opportunities while facing inflation risks.