The US Federal Reserve held interest rates steady for a fourth consecutive meeting on Wednesday, June 18, forecasting higher inflation and cooler growth this year as President Donald Trump's tariffs begin to take hold and geopolitical uncertainty swirls. Fed Chair Jerome Powell told reporters the central bank would make better decisions if it waited a few months, signaling the next rate cut could take some time to materialize.
The Fed kept the benchmark lending rate at a range between 4.25% and 4.50% at the end of its two-day meeting, with officials penciling in two rate cuts this year, similar to earlier projections. The move is likely to draw the ire of Trump, who has repeatedly pressured the independent central bank for rate reductions, and on Wednesday called Powell "stupid" for not lowering rates more quickly.
"We have a stupid person, frankly, at the Fed," Trump said, hours before the bank was due to release its policy decision. "We have no inflation, we have only success, and I'd like to see interest rates get down," he added, speaking at the White House. "Maybe I should go to the Fed. Am I allowed to appoint myself?"
The Fed said in a statement that "uncertainty about the economic outlook has diminished but remains elevated." The central bank also cut its expectations for economic growth this year and raised its inflation and unemployment forecasts in updated projections.
Powell told reporters he expects to learn more over the summer on the effects of tariffs, although the timeline remains unclear. Increases in tariffs this year "are likely to push up inflation and weigh on economic activity," Powell said.
Avoiding a more persistent effect depends on the size of levies, how long it takes for them to pass through to consumers, and keeping expectations anchored, he added.
Powell maintained that the Fed is well-positioned to wait to learn more, before considering changes to interest rates.
"Because the economy is still solid," the central bank can take time to see what happens, Powell said. "We'll make smarter and better decisions if we just wait a couple of months."
The Fed's decision was in line with analysts' expectations, with observers largely expecting policymakers to adopt a wait-and-see approach as they monitor the effects of Trump's broad tariffs on the world's biggest economy.
Trump on Wednesday insisted there was no need to worry about price increases. While the president has imposed a 10% tariff on most US trading partners and steeper levies on imports of steel, aluminum and autos in recent months, these have not triggered widespread price surges so far. This is partly because Trump has backed off from or postponed some of his most punishing salvos, while businesses are relying on existing inventory to avoid hiking consumer costs.
On Wednesday, the Fed cut its expectations for 2025 economic growth to 1.4% from its March projection of 1.7%. It also raised its inflation forecast to 3% and that of the unemployment rate to 4.5%. While officials penciled in two rate cuts this year, more participants than before in its rate-setting committee were inclined toward keeping rates unchanged in 2025.
"The Fed would no doubt be cutting again by now if not for the uncertainty regarding tariffs and a recent escalation of tensions in the Middle East," said KPMG senior economist Benjamin Shoesmith. He added that officials will want to see if price increases are sticky.
Trump has pointed to benign US inflation in arguing for cuts. More recently, he cast such a move as a way for the country to "pay much less interest on debt coming due," overlooking the fact that lower interest rates usually raise consumer prices.
Powell has maintained that the Fed's rate-setting committee would make its decisions solely on objective and non-political analysis.