1. Deciding on interest rate policy
- The Fed kept interest rates unchanged in the range of 4.25% - 4.5% at the June 2025 meeting, marking the fourth consecutive meeting without changing interest rates after three slight cuts in Q4/2024
- Reason for holding: The Fed said it is "well positioned to wait" and wants to see more economic data before taking further action.
2. Comments by Chairman Jerome Powell
- Powell said the US economy continues to be resilient, with no clear signs of weakness in the short term.
- He specifically highlighted the inflation risk from the Trump administration's new tariffs, saying "everyone is expecting a significant price increase due to tariffs."
- The Fed believes that the impact of tariffs on prices will not appear immediately, because existing goods may be imported before the policy is applied.
3. New economic forecasts
- Inflation (PCE core): Forecast 3.1% in 2025, higher than forecast 2.8% in March 2025. This reflects concerns that tariffs will trigger inflation again.
- GDP growth: Down to 1.4%, from 1.7% in previous forecast, showing clear concerns about weak growth
- Unemployment rate: Maintain forecast around 4.1% – 4.2%.
4. Policy Views via FED Dot Plot
- The Fed still maintains its plan to cut interest rates twice this year, bringing the target interest rate down to around 3.75% - 4.0% by the end of the year.
- However, the number of FOMC members who did not support a rate cut increased from four to seven, reflecting internal divisions on policy direction amid macroeconomic uncertainties.
5. Market assessment and response
- Stock markets maintained their upward momentum after the meeting: S&P 500 increased by 0.27%, Nasdaq increased by 0.38%, Dow Jones increased by 106 points, Bitcoin did not fluctuate much, trading around $104,600
- Analysts from Morgan Stanley and JPMorgan have both reduced their expectations for a sharp Fed cut in 2025. JPM even predicts the Fed may not cut again, due to concerns about widespread inflation.
- Bonds remain under pressure as expectations of prolonged high interest rates have not been removed.
🔍 Analysis and evaluation
✅ Positive signals:
- The labor market remains stable, supporting consumer confidence.
- The Fed has been cautious and flexible, taking a "data-dependent" stance rather than making rigid commitments.
⚠️ Risk:
- Return of inflation due to tariffs and rising oil prices from Middle East conflicts are the main risks.
- High borrowing costs continue to affect consumption, the real estate market and businesses.
📌 Conclusion
- The June 2025 meeting showed that the Fed still prioritizes controlling inflation, especially tariff-induced inflation, over boosting growth. Although the Fed maintains its plan to cut twice this year, the actual development may be tilted towards a scenario of only one cut or no cut, if inflation data does not improve.
- Investors should prepare for a higher-than-expected interest rate environment, and focus on PCE inflation data and jobs reports in the coming months.
