Fed Holds Rates for Fourth Time… Maintains ‘Wait-and-See’ Stance Amid Political Pressure
The U.S. Federal Reserve (Fed) decided on June 18, 2025, to keep its benchmark interest rate unchanged for the fourth consecutive time, continuing a cautious policy stance amid lingering economic uncertainty. While the labor market remains strong, tariffs and political variables are still seen as unpredictable risks. Through this decision, the Fed has formalized its “wait-and-see” approach, sending a complex signal to both markets and the political establishment[1][2][7].
📌 U.S. Economic Conditions: Solid Indicators, External Uncertainty
In its official statement, the FOMC (Federal Open Market Committee) assessed that “economic activity has been expanding at a solid pace, and the labor market remains strong with low unemployment”[1][2].
However, the Fed acknowledged ongoing uncertainties related to tariffs, global slowdown, and geopolitical risks. Notably, the recent tariff proposals announced by former President Donald Trump are increasing pressure on supply chains and fueling inflation concerns[6].
🧭 Powell’s Message: “We Follow Data, Not Politics”
Fed Chair Jerome Powell emphasized during the press briefing, “We aim to achieve strong labor markets and price stability,” adding that decisions are made based on economic fundamentals—not political pressure[1][3][7].
He also suggested that “without the tariffs, inflation could have stabilized more quickly,” indirectly criticizing the inflationary effects of recent trade policies[1].
📉 Rate Cut Outlook? Opinions Still Divided
Among the 19 FOMC participants,
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7 projected no rate cuts in 2025,
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8 expected two 25-basis-point cuts[4][5].
This divergence reflects the lack of internal consensus at the Fed, indicating that future decisions will be highly dependent on upcoming data releases.
💹 Market Response: Initial Gains Followed by Volatility
U.S. equity markets initially rose after the announcement but later pulled back following Powell’s remarks[1].
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Tech and growth stocks saw declines as rate-cut expectations weakened.
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Bond markets fluctuated mildly, reflecting investors’ cautious interpretation of the Fed’s message[4].
This volatility shows that policy direction, not the rate level itself, is dominating investor sentiment.
⚖️ Trump’s Criticism and the Fed’s Independence Under Fire
Former President Donald Trump has repeatedly criticized Powell for not cutting rates faster. In some speeches, he even called Powell “stupid”[3]. In response, Powell reaffirmed that “the Fed is an independent institution insulated from political interference”[1][7].
Support for the Fed’s independence is also growing in Congress, with lawmakers calling for the central bank to maintain its credibility and policy objectivity[4].
🔍 Outlook: Has the Rate Peaked or Is This a Prolonged Pause?
The current federal funds rate stands at 4.25–4.50%, a relatively high level.
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If inflation cools more quickly, rate cuts within the year are still possible[5].
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However, if trade tensions and supply chain disruptions worsen, the high-rate policy may persist[6].
Ultimately, the Fed’s next steps will depend on CPI, labor data, and global economic stability[1][4].
In summary, this rate freeze is not just a neutral move, but rather a strategic balancing act between political pressure, trade-related risks, and economic fundamentals. As Powell emphasized, staying focused on data over politics will be the core principle to watch in coming months[1][7].
References
[1] https://www.cnn.com/business/live-news/federal-reserve-interest-rate-06-18-25
[2] https://english.news.cn/northamerica/20250619/b29e1adc55714de381c49b5e6c0bb21a/c.html
[3] https://www.pbs.org/newshour/politics/watch-live-powell-holds-news-briefing-amid-new-attacks-by-trump
[4] https://www.cnbc.com/2025/06/18/fed-meeting-live-updates-feds-interest-rate-projections-loom.html
[5] https://finance.yahoo.com/news/federal-maintains-benchmark-interest-rate-181152376.html
[6] https://dadoc.or.kr/1709
[7] https://kfbk.iheart.com/content/2025-06-18-federal-reserve-holds-interest-rates-steady-for-the-fourth-straight-time/
