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Home Business & Economy

Federal Reserve cuts outlook for US economy but holds interest rates steady

Spluk.ph by Spluk.ph
June 19, 2025
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Federal Reserve cuts outlook for US economy but holds interest rates steady
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The Federal Reserve lower its outlook for the US economic system on Wednesday, with policymakers break up on whether or not they would have the ability to cut back rates of interest in any respect this yr as Donald Trump’s tariffs carry dangers of upper inflation.

Fed officers on Wednesday lower their forecasts for financial development and boosted their outlook for inflation as Trump’s levies on America’s buying and selling companions ricochet internationally’s largest economic system.

The Federal Open Market Committee held rates regular for the fourth assembly in a row at a spread of 4.25-4.5 per cent, regardless of the US president calling earlier on Wednesday for chair Jay Powell to slash borrowing prices by no less than 2 share factors.

Simply hours earlier than the choice, Trump referred to as the Fed chair “silly” and requested whether or not he may “appoint myself” to the central financial institution.

Powell stated on the press convention following the Fed’s charge resolution that “in the meanwhile, we’re properly positioned to attend to be taught extra concerning the possible course of the economic system earlier than contemplating any changes to our coverage stance”.

However he cautioned that “our job is to ensure that a one-time improve in inflation doesn’t flip into an inflation downside”.

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Projections launched on Wednesday confirmed development on the earth’s largest economic system would register 1.4 per cent for 2025 — considerably weaker than final yr, with unemployment rising from its present degree of 4.2 per cent to 4.5 per cent and private consumption expenditures inflation growing from an April determine of two.1 per cent to three per cent.

In March, the median expectation amongst US rate-setters was for the economic system to increase by 1.7 per cent, unemployment to rise to 4.4 per cent and private consumption expenditures inflation to hit 2.7 per cent.

The Fed’s “dot plot” of financial coverage estimates nonetheless confirmed a median forecast that the central financial institution would make two quarter-point charge cuts this yr. However officers have gotten extra divided, with an growing quantity now ruling out any reductions in borrowing prices for the rest of 2025.

There have been nonetheless 10 members anticipating two or extra quarter-point cuts this yr. However seven now forecast no charge cuts and two expect one lower. 

Paul Ashworth, chief North America economist at Capital Economics, famous that there have been “two very distinct camps growing throughout the FOMC”, with some policymakers pencilling in decrease borrowing prices as they fret about development and unemployment and others anticipating no reductions this yr as they concentrate on inflation dangers.

Current inflation information have been tame, however many economists anticipate value development to extend within the coming months as corporations cross on the prices of tariffs. Enterprise surveys have additionally pointed to excessive ranges of uncertainty amongst firm executives over demand throughout the economic system and their very own prices.

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US markets have been muted following the Fed resolution, with the S&P 500 equities gauge little modified. The 2-year Treasury yield, which is delicate to charge expectations, slipped 0.01 share level to three.94 per cent.



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