FOMC Keeps Fed Funds Rate Unchanged at 4.25% to 4.5%, Still Sees Two Cuts in 2025

The Federal Open Market committee kept the target range for the federal funds rate unchanged at 4.25% to 4.5% Wednesday and maintained its outlook for two rate cuts the rest of the year as policymakers raised their inflation forecast. 

Fed officials see the key rate at 3.9% by the end of 2025, unchanged from their median forecast in March, according to the so-called dot plot that illustrates their projections on the policy path. 

Core inflation was seen at 3.1%, higher than policymakers' March projection of 2.8%, according to the summary of economic projections released by the Fed. Unemployment rate expectations were also increased to 4.5%, from 4.4% three months earlier. 

"Uncertainty about the economic outlook has diminished but remains elevated," the FOMC said in a statement released after a two-day meeting. They noted that unemployment remains low and labor market conditions are still solid although inflation remains elevated.

Fed officials expect the median rate to decline to 3.6% by the end of 2026. That's a slower drop than their March projection, when they saw rates at 3.4% next year. They also raised their outlook for 2027 fed funds rate to 3.4%, from 3.1% three months ago.

Real gross domestic product was expected to grow 1.4% this year, slower than the 1.7% that Fed officials forecast in their previous summary of economic projects (SEP). They also lowered their growth outlook for next year to 1.6% and 1.8% for 2027.

The interest rate decision came just hours after President Donald Trump renewed his verbal attacks on Fed Chairman Jerome Powell, calling the policymaker a "stupid person," for his role in keeping rates steady, unlike the European Central Bank that has cut eight times over the past year. 

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