The Federal Reserve concluded its June Federal Open Market Committee meeting, leaving interest rates at 4.25-4.50 for the fourth consecutive time; here’s what you need to know
Key decisions and forecasts
No rate cuts yet
The Federal Reserve voted unanimously to keep rates unchanged, citing caution due to tariff effects and inflation risks
Cut odds were near 0.1 before the meeting
Changes in the dot plot
The updated dot plot now indicates only one rate cut in 2025, down from two in March
Markets are now pricing a 60% chance of a September cut
Economic forecast adjustments
Inflation is expected to rise to 2.5% by year-end, up from 2.4%
Growth and jobs; GDP forecasts cut to 1.5%, with unemployment reaching 4.5%
Why the tariff hold and data divergence
Trump tariffs; Federal Reserve officials fear that new tariffs could raise inflation or hurt growth, but the impact remains unclear
Mixed signals
Cooling retail sales 0.9% in May and industrial production
Strong labor market, 192,000 jobs added in May
Political pressure, Trump publicly called for a 1% rate cut, calling Powell an idiot
Impact on your portfolio
Borrowers continue to feel the pain; credit cards 20% annual rate, mortgages 7%, and auto loans high
Savers seize certificates of deposit and high-yield savings accounts; rates may drop after September
Investors may see stocks decline if the dot plot suggests fewer cuts; Bitcoin faces a technical crossroads, support at $105,000 versus a breakout at $120,000
Highlights from Powell's press conference
Dovish tone; Powell confirmed uncertainty but hinted that a cut may come if labor markets weaken
Focus on the neutral interest rate; long-term rates may stabilize above pre-pandemic levels, reducing the urgency for future cuts
What's next
July 30-31 low odds 13 for a cut
September 17 the first potential cut if tariffs do not ignite inflation
The Federal Reserve is not worried about today’s inflation but is concerned about tomorrow’s, says Derek Tang, economist
In summary, the Federal Reserve is playing it safe, betting on September for relief, but be prepared for volatility if tariffs bite.
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