Federal Reserve Decision – June 18, 2025

Federal Reserve Decision – June 18, 2025

• The Federal Reserve held the federal funds rate steady at 4.25–4.50%, marking the fourth consecutive pause.
• It lowered its 2025 GDP growth forecast to 1.4% (from 1.7%) and sees unemployment rising to 4.5%, while inflation is projected at ~3%, well above the 2% target.
• The Fed still expects two rate cuts in 2025, but internal debate is intensifying: 10 officials back cuts, 7 oppose any, and 2 lean toward a single cut.
• Chairman Jerome Powell emphasized the importance of a “wait-and-see” approach, stressing concern over tariff-driven inflation and geopolitical risks.

Markets & Investor Reaction

• Stocks reacted modestly, with signs of volatility. The S&P 500 ended down just 1.85 points, near flat at 5,980.87. The Dow slipped about 0.1% to 42,171.66, while the Nasdaq climbed 0.1% to 19,546.27. Small‑caps (Russell 2000) edged up 0.5%.
• During Powell’s press conference, markets dipped briefly but stabilized as investors digested the language around patience and reassessment.
• Treasury yields crept marginally higher (10‑year around 4.4%), reflecting caution over inflation expectations.

Fund‑Level Snapshot

• SPY (S&P 500 ETF) currently stands at $597.44, nearly unchanged.
• QQQ (Nasdaq‑100 ETF) at $528.99, also showing minimal movement.

Key Takeaways

1. No immediate interest rate changes, but the Fed signals possible cuts—likely later in the year, possibly around September.
2. Inflation risk from tariffs remains central to future decisions.
3. Markets remain cautious—equity indexes slightly down or flat, bond yields mildly up.
4. Fed remains independent, resisting political pressure and sticking with data-driven decision-making.

Bottom Line

The Fed is pausing for now, cautious about inflation risks linked to tariffs and global uncertainty. While it’s still signaling two cuts this year, the timing remains unclear. Markets are treading water, awaiting clearer signs of inflation trends and economic data.