The Federal Reserve on Wednesday said it’s keeping its benchmark interest rate unchanged, marking a continuation of its “wait-and-see” strategy this year, as it monitors the impact of the Trump administration’s tariffs on consumer prices.
By the numbers
The central bank on Wednesday said it would maintain the federal funds rate at its current range of 4.25% to 4.5%.
The last time the central bank cut interest rates was in December 2024, when it trimmed rates by 0.25 percentage points.
Wall Street had anticipated the Fed’s decision, with economists pegging the probability the central bank would hold rates steady at 96%, according to financial data firm FactSet.
Why is the Fed holding rates steady?
Federal Reserve Chair Jerome Powell has signaled the Fed remains cautious about ushering in lower rates given the potential impact of the Trump administration’s tariffs, which he has said he believes could cause inflation to reignite.
U.S. inflation still remains above the Fed’s goal of driving it down to a 2% annual rate, with the Consumer Price Index inching higher in June to reach 2.7% on an annualized basis. At the same time, the economy remains solid, with today’s GDP report showing stronger than expected second-quarter growth of 3%, providing more ammunition to back up the Fed’s argument for keeping rates steady, economists say.
“This [GDP] report is unlikely to shift the Federal Reserve’s stance,” said Gina Bolvin, president of Bolvin Wealth Management Group, in an email prior to the Fed’s decision. The central bank will “wait for more consistent signals before considering rate cuts.”
Economists currently predict a 63% likelihood the Fed will cut rates at its Sept. 17 meeting, according to FactSet. The Federal Open Market Committee, the central bank’s rate-setting panel, doesn’t meet in August, making the September meeting the next chance for a rate cut.
Aimee Picchi
Aimee Picchi is the associate managing editor for CBS MoneyWatch, where she covers business and personal finance. She previously worked at Bloomberg News and has written for national news outlets including USA Today and Consumer Reports.
