The Federal Reserve Holds Interest Rates Steady for the Fourth Consecutive Time, Divergence Emerges Amid Economic and Inflation Tug-of-War

On the afternoon of June 18, local time, the Federal Reserve announced that it would keep the benchmark interest rate unchanged at 4.25%-4.50%, marking the fourth consecutive meeting of 'holding steady', which aligns with widespread market expectations.

Adjustments in Economic and Inflation Expectations, Policy in a Dilemma: The Federal Reserve noted in its statement that while uncertainty in the economic outlook has lessened, it remains high. At the same time, it lowered the U.S. GDP growth forecast for 2025 to 1.4% but raised the inflation forecast to 3%, highlighting the difficult balance between economic recovery and inflation control.

Adjustments in Rate Cut Expectations, Internal Divergence Intensifies: The Federal Reserve's 'dot plot' indicates that two rate cuts totaling 50 basis points are still expected in 2025, consistent with March's expectations, but the forecast for 2026 has been reduced from two cuts to one (25 basis points). Notably, among the 19 Federal Reserve officials, 7 believe that there will be no rate cuts in 2025, reflecting significant internal divergence regarding the future policy path.