The Fed Holds June 2025 Interest Rates Steady, Ignoring Trump's Pressure

The Federal Reserve (the U.S. central bank) held its benchmark interest rate in the 4.25%-4.5% range on Wednesday, June 18, 2025, (U.S. time), in line with market expectations.

According to Katadata, former President Donald Trump had previously urged the Fed to cut interest rates. The Federal Open Market Committee (FOMC) left open the possibility of two rate cuts by the end of 2025, despite anticipating higher inflationary pressures and slower economic growth.

“For now, we are in a good position to wait and see the direction of the economy before making policy adjustments,” said Fed Chair Jerome Powell in a press conference, as quoted by Katadata from CNBC on Thursday, June 19, 2025.

While the short-term projection leaves room for easing, the long-term outlook is more conservative. The FOMC reduced its projected rate cuts by one each for 2026 and 2027. The median projection shows the Fed funds rate around 3.4% in 2027.

Seven of the 19 FOMC members now do not expect any rate cuts this year, up from four members in the March projection. However, the policy decision was unanimously approved.

Signs of mild stagflation are also evident in the Fed's projections. In addition to slower growth and higher inflation, the unemployment rate is expected to rise to 4.5%, from 4.4% previously, and 0.3 percentage points higher than the current rate.

(Read Katadata: Criticized by Trump, Powell Keeps Fed Interest Rate at 4.25%–4.5%)

Trump Criticizes Powell and the Fed

Previously, Trump again leveled harsh criticism at Powell and the Fed. In a statement on Wednesday, Trump called Powell "stupid" for not pushing for rate cuts, arguing that interest rates should be two percentage points lower.

The U.S. government's interest payments on its debt, reaching US$1.2 trillion this year, are one of Trump's main concerns. This cost is second only to Social Security and Medicare spending, with the budget deficit projected to approach US$2 trillion, or more than 6% of GDP.

Geopolitical factors add to the uncertainty surrounding monetary policy direction. Tensions between Iran and Israel could push energy prices higher and deter the Fed from cutting interest rates. Meanwhile, domestic economic data show a gradual weakening.

Retail sales plummeted nearly 1% in May, long-term unemployment rose, and housing construction hit a five-year low.

(Read: BI Holds Interest Rate in June 2025 Amid Global Uncertainty)