The Federal Reserve of the USA announced the maintenance of its benchmark interest rate at 4.25% - 4.5%. This marks the fourth consecutive decision not to change rates, with updated economic growth forecasts.
FED Hits Pause Again
The Federal Reserve decided to keep its key interest rate unchanged at 4.25% - 4.5%. This is already the fourth time in a row that the FED has made such a decision. Growth forecasts for the US economy for 2025 have been revised down to 1.4%, lower than the previous forecast of 1.7%. Moreover, inflation remains higher than expected, with core PCE projected at 3.1%.
Trump vs. Powell: Who’s to Blame?
Former President Donald Trump has expressed frustration with FED Chairman Jerome Powell, accusing him of acting 'too late' and resisting the rate cuts he desires. Trump argues that inflation is already under control and believes the FED is missing a golden opportunity to stimulate the economy. He even joked that he might run the FED himself just to get things done. Powell, however, emphasizes the need for caution, as uncertainty in the market is still high.
Inside the FED: Divided Views on Rate Cut Timing
The latest 'dot plot' of the FED reveals a split among committee members. While the official message is two rate cuts this year, there are disagreements among members: seven see no cuts at all in 2025, and two others predict only one. Eight policymakers expect exactly two. This indicates a divided outlook on the future of the economy, and the FED is approaching the issue of rate cuts with significant caution.
The Federal Reserve is in a wait-and-see mode. Rate cuts are still on the table, but Jerome Powell is being cautious in his decision-making. The second half of 2025 is expected to be critical for future actions.
