The U.S. Federal Reserve kept its benchmark interest rate unchanged for the fourth time in 2025, as trade-related uncertainties—particularly stemming from the Trump administration’s ongoing tariff policies—continue to weigh on global markets.
Concluding its two-day policy meeting on Wednesday (June 18), the Federal Open Market Committee (FOMC) opted to maintain the federal funds rate in the target range of 4.25% to 4.5%, in line with analyst expectations.
Powell Signals Patience, Highlights Economic Strength
Federal Reserve Chair Jerome Powell emphasized the central bank’s commitment to its dual mandate: promoting maximum employment and ensuring stable prices. He described the U.S. economy as “solid” and noted that current labor market conditions are not contributing to inflationary pressures.
“For the time being, we are well positioned to wait to learn more about the likely course of the economy before considering any adjustments to our policy stance,” Powell said during a post-meeting press conference.
Inflation Still in Focus with PCE Data Approaching
Powell offered preliminary insight into May’s personal consumption expenditures (PCE) inflation data— the Fed’s preferred inflation gauge. Based on estimates drawn from the Consumer Price Index (CPI) and related data, Powell indicated that total PCE prices rose 2.3% year-over-year, while core PCE, which excludes food and energy, increased 2.6%.
These numbers suggest a slight acceleration in inflation compared to April’s official data, which showed total and core PCE increases of 2.1% and 2.5%, respectively. The full PCE report for May is scheduled for release on June 27.
Slowing Growth and the Impact of Tariffs
Powell also acknowledged that gross domestic product (GDP) growth slowed in the first quarter of the year. He attributed this in part to increased import activity, as businesses sought to front-load purchases ahead of new tariffs imposed by the Trump administration.
He cautioned that the full economic effects of these tariffs have not yet been realized, noting that many retailers are still working through pre-tariff inventory. It remains unclear, Powell said, whether the resulting price increases will be temporary or have a more lasting influence on inflation.
Trump Criticizes Fed, Jokes About Replacing Powell
Just hours before the Fed’s announcement, President Donald Trump expressed frustration with Powell’s leadership, joking to reporters that he might appoint himself as chair of the central bank. Trump has repeatedly criticized Powell in recent years, arguing that the Fed should act more aggressively to lower interest rates.
Despite the criticism, Powell—appointed by Trump in 2017—is set to remain in his role until May 2026.
Market Reaction Muted
Financial markets reacted modestly to the Fed’s decision. Gold edged lower by 0.29%, settling at $3,379.48 per ounce, while silver declined 1.03% to trade at $36.72, still hovering near recent highs.
On Wall Street, the S&P 500 dipped 0.08% to 5,578, while the Dow Jones Industrial Average slipped 0.12% to 42,193. In contrast, the Nasdaq-100 gained 0.49%, reaching 21,822 as tech stocks continued to show strength.
As markets await further clarity on the future of U.S. monetary policy and the long-term effects of tariff measures, all eyes will remain on upcoming inflation data and geopolitical developments.
