Despite pressure from the White House to cut interest rates, Federal Reserve officials decided again to leave rates where they are for now, while indicating at least a couple of cuts could be coming later this year.
For the fourth straight meeting, the Fed kept its key rate unchanged, but said despite expectations that inflation will rise, they’re still thinking the rate will be cut twice by the end of the year, acknowledging in their report the U.S. economy is growing at “a solid pace.” It’s the same expectation they expressed following their March meeting.
In its latest quarterly projections for the economy and interest rates, the Fed said it expects noticeably weaker growth, higher inflation, and slightly higher unemployment by the end of this year than it had forecast in March, according to a report from The Associated Press.
Despite heavy criticism from President Donald Trump, Fed Chair Jerome Powell said the Fed does expect Trump’s sweeping tariffs to push up prices by the end of this year and the central bank wants to hold off on any moves until the impact of the duties becomes clearer. The AP reported.
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“We have to be forward looking,” Powell said. “We expect a meaningful amount of inflation to arrive in coming months and we have to take that into account. Because the economy is still solid, we can take the time to actually see what’s going to happen.”
Fed officials see inflation, according to their preferred measure, rising to 3% by the end of this year, from 2.1% in April. It also projects the unemployment rate will rise to 4.5%, from 4.2% currently. Growth is expected to slow to just 1.4% this year, down from 2.5% last year.
