Federal Open Market Committee (FOMC) Meeting Recap – 6/18/2025

RECAP

As projected during last week’s preview, the FOMC maintained the target range for the federal funds rate at 4.25% to 4.50% (leaving interest rates unchanged). Meeting participants reiterated their commitment to a “wait-and-see” approach, emphasizing that inflation risks remain elevated – even though this has not yet been fully reflected in core inflation data. The Fed also released its latest quarterly Summary of Economic Projections, which showed a median estimate of two rate cuts this year. While participants generally agreed that risks to both inflation and employment remain elevated, their projections for the direction of interest rates were divided: seven participants projected no rate cuts, twelve anticipated one or more.

TAKEAWAYS

The Fed won’t budge – at least not yet. Despite mounting calls for rate cuts, including from President Trump, the central bank remains cautious. Fed officials want to be certain that tariffs and recent geopolitical developments won’t stoke inflation before moving forward with cuts. When asked during his press conference, Chair Powell noted that the decision was not about preemptively fighting inflation, but rather needing certainty that prices are trending toward the 2% inflation target. The Fed, perhaps influenced by runaway inflation experienced throughout 2021 and 2022, continues to prioritize price stability.

Treasury yields and equities ended the day relatively flat, though there was initial unease after several members forecasted no rate cuts this year.

MOVING FORWARD

At this stage, the strategy is clear: hold steady through June and July. If inflation data continues to trend favorably, the Fed will likely gain enough confidence to proceed with rate cuts later this year. Markets continue to price in two rate cuts for 2025, consistent with expectations heading into the 6/18 FOMC meeting. Sentiment, however, was somewhat dampened by the fact that seven FOMC participants projected no cuts, leading to a slight contraction in confidence for this forecast. Chair Powell has since advised against overinterpreting these projections, stressing that a majority still see a path toward easing later this year.

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