📊 Key Highlights of Powell's Remarks and Fed Decision (June 2025)
💰 1. Interest Rates Unchanged
- The Federal Reserve maintained the benchmark interest rate at 4.25%-4.50%, marking the fourth consecutive hold since January 2025 .
- Powell emphasized a "wait-and-see" stance, stating the Fed is "**well positioned to wait**" for clearer economic signals before adjusting policy .
⚠️ 2. Tariff Impact on Inflation
- Powell warned that tariffs will cause a "meaningful increase in inflation" in coming months, as businesses pass costs to consumers. He noted: "**Everyone is forecasting a meaningful increase in inflation from tariffs**" .
- The full effect is not yet visible, as goods in stores today were imported before recent tariffs. Inflation expectations for 2025 were revised up to 3.1% (from 2.8%) .
- Near-term inflation expectations have risen due to tariffs, though longer-term outlooks remain anchored at 2% .
📉 3. Economic Growth and Stagflation Risks
- Growth downgraded: The Fed cut its 2025 GDP forecast to 1.4% (from 1.7%), citing tariff uncertainty and Middle East conflicts .
- Stagflation concerns: Policymakers foresee slower growth alongside persistent inflation. Unemployment is projected to rise to 4.5% (up from 4.4%) .
- Powell acknowledged the economy shows "**no signs of weakening**" now but noted risks from trade policies and geopolitical turmoil .
🎯 4. Divergent Rate-Cut Outlook
- The "dot plot" shows deep divisions:
- 7 of 19 officials expect no rate cuts in 2025 (up from 4 in March).
- Majority still projects two cuts (median forecast: 3.875% by year-end) .
- Powell downplayed conviction in projections: "**No one holds these rate paths with a great deal of conviction**" . Markets see only a 10% chance of a July cut .
💹 5. Market and Political Reactions
- Stocks erased gains post-announcement, with the S&P 500 dipping 0.03% as Powell’s tariff warnings sparked sell-offs .
- Trump criticized Powell hours before the decision, calling him "**stupid**" and blaming high rates for "**costing the country a fortune**" .
- Powell deflected political pressure, stressing the Fed’s focus on "**a good, solid American economy**" .
💎 Key Quotes from Powell
> "**We expect a meaningful amount of inflation in the coming months** due to tariffs."
> "**We are well positioned to wait** to learn more about the likely course of the economy."
> "**Someone has to pay for the tariffs**... ultimately, some of it will fall on the end consumer."
📈 Economic Projections Summary
Table: Fed Revisions (March vs. June 2025 Projections)
| Indicator | March 2025 | June 2025 | Change |
|---------------------|----------------|---------------|------------|
| GDP Growth | 1.7% | 1.4% | ↓ 0.3 pp |
| Core Inflation | 2.8% | 3.1% | ↑ 0.3 pp |
| Unemployment Rate | 4.4% | 4.5% | ↑ 0.1 pp |
| Fed Funds Rate (EoY)| 3.875% | 3.875% | Unchanged |
Source:
🔮 Outlook Ahead
The Fed’s path hinges on tariff implementation, geopolitical stability (e.g., Israel-Iran conflict), and labor market resilience. While some analysts (e.g., Goldman Sachs) expect cuts to resume in late 2025 if inflation cools , others warn of a "**no-rate-cut environment**" (Morgan Stanley) . Powell’s message is clear: Patience outweighs premature action amid unprecedented uncertainty.