Fed Holds Rates Steady Again, Flags Stagflation Risks Amid Tariff Uncertainty
The Federal Reserve kept interest rates unchanged for the fourth consecutive meeting on Wednesday, while warning of stagflation risks as it forecast slower economic growth and a potential rise in inflation this year. The outlook remains clouded by concerns that President Trump’s tariffs could further fuel price pressures.
The Federal Open Market Committee (FOMC) maintained its benchmark interest rate within the 4.25% to 4.5% range.
Despite keeping rates steady, Fed officials still anticipate two rate cuts this year, projecting the policy rate to fall to 3.9% by year-end. The 2026 forecast was revised upward to 3.6% from 3.4% previously, while the 2027 estimate also rose to 3.4% from the earlier 3.1%.
While recent inflation data has shown signs of softening, Fed policymakers remain cautious, citing uncertainty over how much the new round of tariffs could push prices higher. This uncertainty has kept the Fed from signaling any near-term pivot toward easing.
The labor market continues to show resilience, with a strong June jobs report reducing pressure on the Fed to move quickly toward rate cuts.
All eyes will now turn to Fed Chair Jerome Powell’s press conference at 2:30 p.m. ET (19:30 GMT), where investors hope to gain deeper insight into the Fed’s updated economic outlook, including its stance on tariffs and future interest rate decisions.
