The US Federal Reserve began its fourth meeting this year on June 17, having kept interest rates unchanged in its January, March, and May meetings despite mounting pressure from President Donald Trump to lower borrowing costs.
But will the central bank finally respond to his repeated calls amid rising trade and military tensions?
A Pause… But a Long One
After cutting interest rates by 100 basis points (bps) in Q4 2024, the Fed decided to hold steady for a while, especially as inflation remained well above its 2% target — a stance that has not been appreciated by President Trump.
Trump Turns Up the Heat
Since taking office in January, Trump has seized every opportunity to sharply criticize the Fed and its Chairman, Jerome Powell, for not cutting rates. He even called Powell a “fool” and demanded a 200 basis-point cut, which he claims would save the country $600 billion annually.
Federal Reserve Meeting Schedule – 2025
Meeting Date
Decision / Expectations
Notes
Jan. 28–29
Hold
—
March 18–19
Hold
Policymakers projected two rate cuts this year in their quarterly report
May 6–7
Hold
—
June 17–18
Hold
Official projections report to be released after meeting
July 29–30
—
—
Sept. 16–17
—
Official projections report to be released after meeting
Oct. 28–29
—
—
Dec. 9–10
—
Official projections report to be released after meeting
Trump Confronts Powell
Last month, Trump summoned Powell to the White House, telling him that the refusal to cut rates was a mistake and that it placed the US at a disadvantage compared to China and other countries.
Powell Pushes Back
Powell responded that interest rate decisions would be made based on analytical data, not political pressures. However, he did not comment on the future of interest rates.
Inflation Slows Slightly
The core Personal Consumption Expenditures (PCE) price index—the Fed’s preferred measure of inflation—hit 2.5% in April, down slightly from 2.6% in March, but still above the 2% target.
Barriers to a Cut
In the May meeting, Fed policymakers reiterated their aim of bringing inflation down to 2% over the long term. However, today’s meeting comes as global oil prices rise to around $77, up from $62 during the last meeting, driven by tensions in the Middle East.
Additional Risks
Powell warned after the last meeting that both unemployment and inflation risks are rising simultaneously. He noted that higher tariffs are pushing up prices, slowing growth, and increasing unemployment. Powell emphasized that there’s no need to rush policy changes amid trade war uncertainty.
What Do Markets Expect?
Markets do not expect a surprise. According to the FedWatch tool, there is a 97% chance that rates will remain in the current range of 4.25% to 4.50% at the end of today’s meeting, with only a 3% probability of a 25 basis-point cut.
When Will the Cuts Begin?
The tool also suggests that rates will remain unchanged in June and July, with the first cut—by 25 basis points—likely in September. Today’s meeting may play a major role in shaping market expectations.
Your Call?
Finally, considering the risks—such as persistently high inflation, the trade war, and Middle East tensions that could push oil prices even higher—what would be your decision if you were a member of the Federal Open Market Committee?
Sources: Argaam
https://www.argaam.com/en/article/articledetail/id/1821669
