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Fed Holds Rates Steady, Projects Two Cuts by Year-End Amid Tariff Uncertainty

by Team Lumida
June 19, 2025
in Macro
Reading Time: 4 mins read
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Fed Signals Rate Cut: What It Means for Your Investments

"Federal Reserve Bank of Chicago, Bank Heist by Alvin Karpis and the Barker-Karpis Gang" by Chicago Crime Scenes is licensed under CC BY-NC 2.0

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Key Takeaways:

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  • The Federal Reserve kept the benchmark federal funds rate unchanged at 4.25%-4.5%, maintaining its stance since the start of 2025.
  • Policymakers are divided, with 10 officials expecting at least two rate cuts this year, while seven foresee no cuts.
  • New forecasts show weaker economic growth (1.4%), higher inflation (3%), and rising unemployment (4.5%) by the end of 2025.
  • Fed Chair Jerome Powell emphasized the need to assess the impact of Trump’s tariffs on inflation and economic activity before adjusting policy.

What Happened?

The Federal Reserve voted unanimously to hold interest rates steady, citing uncertainty over the economic impact of President Trump’s sweeping tariffs introduced in April. The Fed’s updated projections reflect a challenging economic outlook, with weaker growth, higher inflation, and rising unemployment expected this year.

While 10 Fed officials anticipate at least two rate cuts by the end of 2025, seven policymakers believe no cuts will be necessary, highlighting a growing divide within the Federal Open Market Committee. Powell downplayed the division, attributing it to the high level of economic uncertainty.

The Fed’s decision aligns with market expectations, as traders continue to price in two rate cuts, with the first likely in September.


Why It Matters?

The Fed’s cautious approach underscores the complexity of balancing inflationary pressures from tariffs with slowing economic growth. Trump’s tariffs are expected to raise consumer prices, but their full impact has yet to materialize in inflation or employment data.

The central bank’s decision to hold rates reflects its desire to avoid premature policy adjustments while monitoring the evolving economic landscape. However, the split among policymakers highlights the challenges of navigating conflicting economic signals.

For businesses and consumers, the Fed’s projections signal a mixed outlook: higher borrowing costs in the short term but potential relief later in the year if rate cuts materialize.


What’s Next?

The Fed will closely monitor the impact of tariffs on inflation and economic activity, with Powell emphasizing the need for more data before making policy changes. Markets will watch for signs of inflationary pressures and shifts in employment trends, which could influence the timing of rate cuts.

The first rate cut is widely expected in September, but geopolitical risks and economic data could alter the Fed’s trajectory. Investors will also keep an eye on Trump’s continued pressure on the Fed to lower rates, which could add political complexity to monetary policy decisions.

Source
Tags: Federal Reserve
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© 2025 Lumida Wealth Management LLC is an SEC registered investment adviser. Privacy Policy. Cookies Policy.
Disclaimer Important Information This site is for informational purposes only. Information presented on this site does not constitute as investment advice.

Lumida Wealth Management LLC (‘Lumida”) is an SEC registered investment adviser. SEC registration does not constitute an endorsement of the firm by the Commission nor does it indicate that the adviser has attained a particular level of skill or ability.

Lumida's website (referred to herein as the "Website") is limited to the dissemination of general information pertaining to its advisory services, together with access to additional investment-related information, publications, and links. Accordingly, the publication of the Website on the Internet should not be construed by any client and/or prospective client Lumida’s solicitation to effect, or attempt to effect transactions in securities, or the rendering of personalized investment advice for compensation, over the Internet.

Any subsequent, direct communication by Lumida with a prospective client will be conducted by a representative that is either registered or qualifies for an exemption or exclusion from registration in the state where the prospective client resides.

‍Lead Capture Forms: By submitting your contact information in the forms on this site, you are not obligated to invest in Lumida's product or services.
‍Address: Lumida Wealth Management, 25 W 39th Street Suite 700, New York, NY 10018