The Fed to keep rates unchanged until September

The Fed is staying put on interest rates and won’t be making any cuts until at least September, based on new data from a June 5–10 Reuters survey of 105 economists.

Almost all of them—103 to be exact—said the Federal Open Market Committee (FOMC) will hold rates steady at 4.25% to 4.50% during the June 17–18 meeting, the same range it’s been stuck in since the start of the year. The only reason? Inflation still hasn’t calmed down, and the labor market isn’t showing enough pain to force the Fed’s hand.

The forecast comes at a time when economic stability is still on edge. Trade negotiations between the U.S. and China remain incomplete, and a July 9 deadline for a temporary 90-day tariff pause is fast approaching.

That truce, first introduced in April, hasn’t led to much actual progress, and now economists are keeping their outlooks fragile. The White House, under President Donald Trump, has raised tariffs on steel and aluminum from 25% to 50%, and markets are starting to price in the cost of those decisions.

On top of that, a massive new tax cut bill just passed by the House of Representatives is fueling more uncertainty, as it hasn’t yet passed through the Senate.

Trump demands cuts as economists hold the line

Despite pressure from Trump to lower rates by a full percentage point—he wants to see the fed funds rate drop to 3.25%–3.50%—the Fed is unmoved.

The central bank is watching inflation expectations closely, and they’ve stayed high thanks to growing assumptions that the U.S. will keep erecting trade barriers. UBS Chief U.S. Economist Jonathan Pingle summed up the hesitation clearly:

“As long as the labor market looks fine, we expect the FOMC to continue to stay on hold, and use rhetoric to bolster their inflation-fighting credibility. Until there is a cost, why signal otherwise?” Pingle also added, “At the moment ‘grey area’ seems more ‘charcoal’ … the Committee is facing a substantial amount of uncertainty.”

Out of the 105 economists Reuters spoke to, 59 said they believe the Fed will begin cutting rates in the third quarter of 2025, most likely September, while 44 predicted the cuts won’t happen until Q4 or later. Another 20 said there would be no rate cuts at all this year. So while the majority still expect a move in a few months, a big chunk think it’ll be much longer.

BNP Paribas Chief U.S. Economist James Egelhof believes the inflation problem isn’t going away. “High tariffs are here to stay, and they will produce elevated inflation that is sustained well into 2026,” he said. “The Fed will see little need to cut … the lesson we have from history is, if inflation becomes entrenched in the economy, it can be very hard and very costly to remove.”

Debt concerns and spending bill drive uncertainty

While inflation is a major concern, so is federal debt, which has now ballooned to $36.2 trillion. The new tax-and-spending package making its way through Congress is expected to pile on another $2.4 trillion, and the bond market is already reacting.

The increased issuance of Treasuries is pushing up long-term interest rates, which directly affects lending costs for things like housing and business investment.

Comerica Bank Chief Economist Bill Adams explained why the Fed won’t be rushing to help.

“With more fiscal stimulus coming out of the tax and spending bill, the Fed sees less of a case for supporting the economy with lower interest rates,” Bill said. “The fiscal policy looks set to push the deficit (higher) … exerting continued upward pressure on long-term interest rates that will be a headwind for credit-intensive parts of the economy like the housing market and business capital spending.”

The economy isn’t doing great either. U.S. GDP shrank by 0.2% last quarter, largely due to a growing trade deficit, and full-year growth is now expected to reach only 1.4%, down sharply from 2.8% in 2024. Next year’s forecast is just slightly better at 1.5%, and that projection hasn’t moved since May.

Even as U.S. officials continue trade discussions in London with top Chinese representatives, there’s no strong indication of any deal materializing before the tariff pause expires. Meanwhile, both economists and everyday Americans are bracing for higher prices to stick around. Inflation expectations remain well above the Fed’s 2% target, and no one expects that to change until at least 2027.

By the end of 2025, most economists—85 of them—think the fed funds rate will still be at 3.75% to 4.00% or even higher. Nobody has a clear view on exactly when that rate will finally drop. What’s obvious is that the Fed is in no mood to make a move unless something dramatic happens, and so far, nothing has.

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