Fed Interest Rate Cuts on Hold Amid Inflation and Tariff Risks

The United States Federal Reserve has chosen to keep interest rates steady for the fourth time in a row, keeping the fed interest rate between 4.25% and 4.5%. This decision came during the June 18 FOMC (Federal Open Market Committee) meeting. While many expected no change in rates, Fed Chair Jerome Powell’s explanation drew attention, he blamed Donald Trump’s tariffs for causing fresh inflation worries.

Source: Federal Reserve

Powell Points to Tariffs as Inflation Risk

After the meeting, Powell spoke at a press conference and made it clear that Trump tariffs are now playing a big role in rising short-term inflation expectations. Although it has come down from its 2023 highs, Powell said that recent trade tensions and tariffs are slowing down the Fed’s plans to lower interest rates.

He warned that global uncertainty caused by trade policy is making it harder to reduce the rate of inflated prices further. He further added that while the labor market is still in a good position, the federal reserve must be careful before making any big changes to monetary policy.

Revises Economic Forecasts

As reported by Reuters, with the decision on interest rates, the Federal Reserve also lowered its 2025 forecast of GDP to 1.4% from 1.7%, while raising the estimate of inflation to 3% from 2.7%. These alterations depict that the central bank considers the economy may grow slower and face more rise in the prices than what was expected previously.

However, in a minor but crucial shift, the Fed removed lines from its statement that earlier communicated about the risks of high unemployment and growing inflation. This change in the language depicts the Fed is now a little more hopeful about the economy compared to earlier meetings.

Rate Cuts Still Possible Later This Year

Despite keeping the rates steady this time, Powell said that rate cuts could still happen later in 2025, on the basis of how inflation numbers behave. Right now, traders and many Fed officials expect two rate cuts this year, adding up to 50 basis points. There are four more FOMC meetings left in 2025 next scheduled for 30th July, so they has time to act if the situation improves.

Donald Trump has also increased pressure on the regulatory body to cut rates, using the European Central Bank’s recent rate cut as an example. But Powell said they will continue making “informed” decisions based on U.S. data, not outside pressure.

Crypto Market Shows Signs of Recovery

The crypto market didn’t make any big moves after the Fed's announcement. Bitcoin dropped to $103,000, just before the meeting, but has since recovered to almost $105,000. Other top cryptocurrencies like Ethereum and XRP also experienced slight gains.

Source: CoinMarketCap

Investors appear to be waiting for stronger indications of impending rate cuts before taking significant action.

Conclusion

The Federal Reserve's decision to leave rates unchanged and its guarded tone indicate it's still concerned about inflation, particularly from tariff pressures. But the subtle shift in its economic message and the consistent labor market offer optimism for potential easing later this year.

For the time being, the crypto market is at peace, with slight indications of recovery but without a large jump. Everyone now looks to the actions of the federal reserve as speculators await whether or not rate cuts will finally materialize.