June Fed meeting recap: Fed leaves rates alone, continues to see two cuts in 2025

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The Fed is in no rush to make any changes to interest rates and is comfortable with the current economic conditions, even while the administration and many economists are not. The focus is still squarely on inflation for the next few months. 

I expect there will be one to two rate cuts this year, and if inflation remains relatively cool in July and August, the first rate cut in 2025 should come in September.

As Chair Powell said multiple times, the committee has little conviction for the rate path, given uncertainty. Barring any unforeseen shock, it is unlikely we’ll see a deterioration in the labor market great enough to tilt the scales toward easing more.

Chair Powell suggested that taxes on imports, known as tariffs, will keep driving up prices in the coming months. He noted that all of the forecasters he’s been monitoring believe this to be the case. Interestingly, this is consistent with a new Bankrate survey finding that nearly two-thirds of Americans believe tariffs will be negative for their finances. That’s not what Powell said, but he expressed confidence that consumers will feel some degree of bite from rising prices in the not-too-distant future.

Our advice at Bankrate is for individuals and households to prioritize emergency savings and to pay down debt. This will be especially helpful if consumer prices surge, making life more expensive for just about everyone.

The FOMC’s projections suggest some softening in the job market and economic growth in the months ahead, and officials also see price increases being passed along to consumers from tariffs. 

I asked Chairman Powell if he thinks workers still have a degree of bargaining power to ask for higher pay — a crucial question right now as officials look to see whether tariffs may lead to a more persistent inflation problem. 

“It’s a pretty good labor market,” Powell said. Wages are still moving up “at a healthy clip,” he said. But he also noted that workers are facing longer search times in the midst of slower hiring. 

Bottom line: Powell suggests that workers should generally expect decent wage growth as long as unemployment stays stable.

Chair Jerome Powell characterizes the economy as in a ‘solid’ position but the FOMC expects a ‘meaningful amount of inflation’ to arrive in the months ahead. Waiting affords more time to digest incoming data and, they feel, will lead to better decisions on their part.

Back in April, J.P. Morgan Research raised its odds of a recession this year to 60 percent, up from 40 percent. That weighs on the Federal Reserve’s decisions about interest rates — but should a potential downturn affect your homebuying decision?

Probably not, housing experts say. For a buyer, the main fear boils down to: Am I going to lose my job in a recession? The answer is not likely. For perspective, consider that the national unemployment rate briefly surged past 10 percent during the Great Recession and the pandemic. During most U.S. recessions, however, the jobless rate remains in the single digits. In other words, more than 90 percent of Americans keep their jobs.

Ultimately, a generalized fear of a recession shouldn’t change your homebuying plans, but if you have a specific concern about job security, then it’s smart to tread cautiously.

A growing minority of FOMC members are forecasting zero rate cuts this year — seven of 19 are making that prediction, up from four of 19 three months ago. And even if we get a cut or two, that won’t make a big difference in the grand scheme of things. 

This is good news for savers but bad for borrowers. The average credit card rate, for example, is a near-record 20.12 percent and unlikely to fall substantially anytime soon. Mortgage and auto loan rates remain quite elevated as well.

Record-high car prices coupled with high interest rates have made affordability an issue for many consumers. Prices are expected to rise further due to tariffs and shrinking vehicle inventory, and a shortage of used vehicles is also keeping prices unusually high. This means that lenders will see higher loan amounts and older used vehicles, resulting in riskier loans.

Because car buyers need to borrow more and turn to longer loan terms, lenders are increasingly courting borrowers who pose less risk. The average credit score to qualify for an auto loan has been increasing, but subprime approvals rose slightly in May, according to recently published data in the Dealertrack Credit Availability Index. While interest rates may not fluctuate much through 2025, it may still become more difficult to afford a car in the coming months. Take the Fed rate into some consideration when shopping, but remember that lenders rely on much more to guide approvals and interest rates.

Investors are demanding higher returns for the growing risks of long-term U.S. inflation

• Bond investors have been pushing up 10-year Treasury rates since the Fed first began lowering short-term rates in Sept. 2024, indicating they expect higher inflation in the future. Since April, the 10-year rate continues to set “higher lows” each time the yield falls. 
• The key driver of long-term rates now is President Trump’s “One Big Beautiful Bill” Act, which would increase long-term U.S. budget deficits and inflation, as it includes a series of tax cuts without offsetting cuts to government spending.
• As bond investors expect greater inflation in the future, they’re demanding higher rates on long-term Treasurys, notably the 10-year Treasury note. The 10-year Treasury is key to the housing market and homebuyers, since mortgage rates are priced based on the 10-year rate. 
• So homebuyers looking for much-reduced mortgage rates may need to keep waiting, perhaps until a recession, while homesellers shouldn’t expect lower rates to boost home prices soon. 

We’re just about 20 minutes into the Fed’s post-meeting press conference, and we’ve heard Powell hint multiple times that officials think their latest interest rate projections could have a pretty big margin of error.

“No one holds these rate paths with a lot of conviction,” Powell said. 

The message for consumers: Don’t get too comfortable with the Fed’s new projections for two rate cuts in 2025. Policymakers are facing an uncertain economic environment, and their projections will shift as the data paints a clearer picture. 

Case in point: No official in June 2024 projected that the U.S. central bank would end up cutting borrowing costs a full percentage point by the end of the year. The median estimate penciled in just one quarter-point rate cut.

Powell fielded two successive questions about “how many months” of cooling inflation will it take before the Fed decides that the economy is in the right place for more interest rate cuts. The Fed chair alluded to the lack of conviction for the rate paths and scenario analysis given the still high level of uncertainty the economy and the committee face. Powell said that they expect to learn more throughout the summer. This spells doom for any July cuts.

The slowdown in the labor market doesn’t appear to be raising any alarm bells at the Fed, Powell said at his post-meeting press conference. 

“You can see perhaps a very, very slow, continued cooling, but nothing that’s troubling at this time,” Powell said. “But we watch it very, very carefully.” 

I expect Powell to get a lot of questions about the labor market this time. The Fed describes the labor market as ‘solid’ in its post-meeting statement. Is it? There are a lot of workers and economists who would question that statement given the slowdown in wage growth, the low rate of hiring, and the multiple weeks of rising jobless claims. 

A growing share, however, see no rate cuts this year

The Fed just released its new interest rate projections. Here’s what officials are expecting to do: 

• Policymakers continue to project a median of two rate cuts this year
• Just two officials expect to cut rates three times 
• Two officials expect one cut, and a growing share of policymakers (seven in June 2025, up from seven in March) now expect rates to stay steady for the entire year
• Interest rates, however, are expected to stay at a decade-plus high through 2027

The message for consumers is: This is a cautious Fed. Even if the Fed does cut its key benchmark interest rate, the borrowing costs that you pay to finance big-ticket purchases are expected to stay elevated for as far as the eye can see. But, of course, these projections are only if the U.S. economy evolves the way the Fed expects — and U.S. central bankers are facing a highly uncertain environment, given that tariffs could either cause the economy to slow or generate more inflation. 

Officials see higher unemployment and inflation, new projections show

The Fed also revealed where it expects inflation, unemployment and economic growth to be in the year ahead. 

Here’s the median projection from the entire Federal Open Market Committee (FOMC):

• Inflation: 3%, up from 2.7% in March (current 2.1%) 
• Core inflation: 3.1%, up from 2.8% (current 2.5%) 
• Unemployment: 4.5%, up from 4.4% (current 4.2%) 
• Economic growth: 1.4%, down from 1.7% (The economy shrank -0.3% in Q1) 

What it means: Unemployment is expected to rise a bit higher, the Fed doesn’t think we’re now out of the woods when it comes to inflation just yet and U.S. economic growth could be the weakest in years. While we can’t definitively term this a “recessionary” forecast (the Fed’s own estimates of “full employment” are around 3.5-4.5%), it strongly suggests that consumers could face the weakest economy since the pandemic, potentially even more sluggish than the pre-pandemic economy.

The FOMC has now gone six months without a rate cut, but officials still think they’ll be able to cut this year  

The Federal Reserve voted on Wednesday to keep interest rates unchanged for the fourth consecutive meeting.

Here’s what to know:

• Officials are still playing it safe with inflation given widespread concern that President Donald Trump’s tariffs could eventually lead to higher prices: Look at the economic data, and a rate cut might appear warranted on paper. Inflation rose just 2.1 percent in April, the closest it’s been to the Fed’s target since prices first surged in the aftermath of the pandemic, according to the Department of Commerce. Meanwhile, the nation’s unemployment rate is holding at 4.2 percent, near the Fed’s estimates of maximum employment. Policymakers, however, aren’t sure if price pressures will keep trending in the right direction. After Trump lifted import taxes to the highest level since the Great Depression in April, businesses have been telling Fed officials that they’ll have no choice but to pass those higher prices onto consumers.
• Borrowing costs, but savings yields, will stay elevated: The announcement means the Fed’s key benchmark rate will stay in a target range of 4.25-4.5 percent, the highest since 2007. Borrowers looking for lower interest rates will have to keep waiting as the Fed decided to leave interest rates alone again. Savings yields, however, will likely stay elevated, the main silver lining with higher interest rates. There’s no guarantee, however, what mortgage rates will do, with those yields following more closely the 10-year Treasury yield. 

Looking for our full breakdown? Read more at: Fed keeps interest rates unchanged as it weighs inflation risks from tariffs.

With recession worries in the air, now might be a tricky time to lean on your home’s equity. The Federal Reserve is expected to hold pat, which means the rates tied to HELOCs and home equity loans could stay in the 8 percent range we’ve seen as of late. While that’s less expensive than credit cards or personal loans, it’s still far from “cheap” borrowing.

That’s a tough break if you were planning to tap your home’s value for renovations, debt consolidation or a bit of financial breathing room. In this “rate wait” scenario, is it better to keep waiting for lower rates, or go ahead and borrow against your home in uncertain times? I recently explored both cases in my story on tapping your home equity in a recession.

Markets have shrugged off rising risks and bid up stocks to a whisker of their all-time highs

• The S&P 500 and Nasdaq Composite are sitting just below their 52-week and all-time highs despite raging risks, especially the potential inflationary effects of the Trump tariffs but also the risk of rising oil prices, either of which could choke economic growth.
• President Trump’s 90-day “delay” of the April 2 tariffs marked the bottom of the market, and since then the market’s blue chips, including Microsoft, Alphabet and Amazon, have soared. 
• But the S&P 500 now trades around 22 times earnings, a historically elevated level, so that even if some of the major risks aren’t ultimately realized, stocks are priced for companies to perform very strongly, raising the risk that they may not meet expectations. High rates help keep the brakes on the economy, meaning it’s harder for companies to outperform expectations. 
• While stock prices may be elevated, experts recommend that investors stick to their long-term investing plan, such as a 401(k), which may involve continuing to buy stocks regularly. However, individual investors trying to invest a lump sum with a well-timed trade should be wary.  

High APYs are a silver lining during Fed’s holding pattern

The Federal Reserve continues to hold its benchmark rate at its highest range since 2007 — and while this can cause headaches for borrowers, savers are enjoying a moment in the sun. The Fed’s 11 rate hikes after the coronavirus pandemic lifted yields on savings accounts and CDs to their highest level in over a decade. While yields have retreated somewhat from those highs as the Fed cut rates, competitive accounts are still earning annual percentage yields (APYs) that are many times greater than accounts earning the national average.

If you’re in search of high-yield savings accounts with the best rates, look to online-only banks, which may offer highly competitive yields to draw customers away from long-established big banks. Credit unions can also be a good source of attractive rates because they return profits to their members, often in the form of higher dividends.

Investors currently think the Fed will cut borrowing costs twice in 2025, bringing its key benchmark federal funds rate to a target range of 3.75-4 percent, according to CME Group’s FedWatch tool. The first cut is projected to occur at the Fed’s September meeting, and the second cut is expected to happen in December, those rate projections show. 

But these forecasts are subject to change. They are purely just a reflection of what investors expect based on the latest economic data and the most recent comments from the Fed itself (which were from mid-June, before the U.S. central bank went on its “black period” before the June meeting). 

All that’s to say, things could move around a bit if Powell’s comments during the press conference or the Fed’s new projections offer any surprises. But they’re an interesting way to gauge how many people are thinking about monetary policy in this current moment — and the takeaway for you is, the price of borrowing money is expected to remain elevated for some time. 

It’s Fed Day! Policymakers are likely going to keep their key borrowing benchmark at a decade-plus high for another month. No one I’ve talked to over the past few weeks expects that the Fed will cut rates today. Neither do investors. 

Even the very policymakers who decide what to do with interest rates have implied in public appearances leading up to today’s meeting that they’re not ready to make a rate cut. They need more time to watch and study the data — and they think they have the time to be patient. Although the job market is showing signs of a slowdown, the nation’s unemployment rate remains near historic lows. The Fed’s utmost priority: Making sure that tariffs don’t lead to another inflation spiral. 

But our goal today is parsing through the Fed’s many statements to help you determine when the next cut might be — and if it could occur as soon as the Fed’s next rate-setting meeting in July.

Here’s the schedule of events: 

• At 2 p.m. ET, the Federal Open Market Committee (FOMC) will announce its next interest rate decision.
• Also at 2 p.m., the Fed will also update consumers and inventors on where they see interest rates and economic growth (think: unemployment, gross domestic product, inflation and more) heading through the rest of this year — and beyond. Here’s an explainer on how to read it. 
• At 2:30 p.m., Fed Chair Jerome Powell will take questions from reporters (including us at Bankrate!) at a press conference in Washington, D.C. 

Check back for updates throughout the day, as we break down what you need to know ahead of the Fed’s announcement — and help you understand what it means for you.