The Fed Holds Interest Rates
Fed signals no rush to cut rates, prioritizing inflation control over political pressure or market impatience.
Despite signs of easing inflation, the Federal Reserve is once again opting for patience. At its June meeting, policymakers voted to keep interest rates steady, resisting growing market pressure for cuts.
While consumer prices have cooled from 2022 peaks, officials are concerned that underlying inflation remains sticky and could be further stoked by new tariffs and shifting consumer expectations. In particular, policymakers worry that Americans are beginning to expect inflation to linger, a psychological shift that can make inflation harder to break.
The Fed’s restraint also signals a defense of institutional independence. President Trump has openly criticized Chair Jerome Powell, urging immediate rate cuts to boost growth. But cutting too soon, especially under political pressure, could jeopardize the Fed’s credibility and risk a resurgence in inflation.
For now, the Fed appears to be taking a wait-and-see approach. With the labor market holding up and inflation trending downward, officials have space to be cautious. Still, the longer rates stay high, the more pressure builds on housing, business investment, and consumer credit.
Markets are now pricing in a possible rate cut by late summer, but only if inflation expectations stabilize. Until then, the Fed is signaling that it's willing to hold the line even as global peers begin to ease.
The message: Don't expect cheaper credit just yet. The Fed is betting that a longer runway now could help avoid more turbulence later.