Key points:
- The Federal Reserve’s Federal Open Market Committee voted to maintain the federal funds target range between 4.25% and 4.5%.
- Expectations among committee members for the path of interest rates and the potential for future cuts (or hikes) remained unchanged, with the median expectation being two cuts by the end of this year.
Against a backdrop of ongoing economic uncertainty and the prospect of more volatility yet to come, the Federal Reserve is clearly in no rush to cut interest rates. Inflation remains above the Fed’s 2% target. And with no obvious resolution yet in sight, the current 90-day pause on the implementation of tariffs on a wide range of global goods will expire in July, further contributing to uncertainty. Even at current, somewhat lower, effective tariff rates, many consumers and businesses say they expect prices to rise in the coming months. That uncertainty is somewhat balanced by a labor market that has weakened but “remains solid.” From the Fed’s perspective, substantial ongoing uncertainty paired with a good-enough-for-now labor market is ample justification to continue its wait-and-see approach.
