The Federal Reserve on Wednesday announced that it will leave its benchmark interest rate unchanged, as policymakers decided to hold rates steady amid elevated economic uncertainty as they continue to monitor inflationary pressures and labor market data.
The central bank’s decision leaves the benchmark federal funds rate at a range of 4.25% to 4.5%, where it has remained following all five of the Fed’s policy meetings this year. The central bank cut rates at its final three meetings in 2024, including a 50-basis-point cut in September and a pair of 25-basis-point reductions in November and December.
The Federal Open Market Committee (FOMC), which guides the central bank’s monetary policy moves, noted in its announcement that “recent indicators suggest that the growth of economic activity moderated in the first half of the year. The unemployment rate remains low, and labor market conditions remain solid. Inflation remains somewhat elevated.”
The FOMC voted 9-2 to leave rates unchanged, with Fed Governors Michelle Bowman and Christopher Waller dissenting from the decision on the grounds that they would have cut the federal funds rate by 25-basis-points. One governor was absent and didn’t vote at this meeting.
Federal Reserve Chair Jerome Powell spoke at a press conference following the decision and said the central bank is focused on its dual mandate goals of maximum employment and stable prices, noting that “despite elevated uncertainty, the economy is in a solid position.”
He noted that despite today’s report that second quarter GDP grew at an annual rate of 3%, that the economy’s growth in the first half of 2025 was closed to 1.2% when accounting for the 0.5% contraction in the first quarter.
Powell added that data suggests the labor market is “broadly in balance and consistent with maximum employment,” and while inflation has eased from its 2022 highs, it remains elevated relative to the Fed’s 2% longer-run goal.
“Changes to government policies continue to evolve, and their effects on the economy remain uncertain. Higher tariffs have begun to show through more clearly to prices of some goods, but their overall effects on economic activity and inflation remain to be seen,” Powell explained.
“A reasonable base case is that the effects on inflation could be short-lived, reflecting a one-time shift in the price level. But it is also possible that the inflationary effects could instead be more persistent, and that is a risk to be assessed and managed,” he added. “Our obligation is to keep longer-term inflation expectations well-anchored, and to prevent a one-time increase in the price level from becoming an ongoing inflation problem.”
This is a developing story. Please check back for updates.
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