Fed leaves rates steady, projects higher inflation
The Federal Reserve left interest rates unchanged for the fourth straight meeting, as its leaders projected weaker growth and higher inflation this year than they envisioned three months ago.
Even so, they continue to expect two rate cuts later this year.
Why it matters: The central bank has resisted President Trump's calls for immediate rate cuts, as its leaders believe that a volatile policy environment will fuel both higher prices and a weaker job market in the near term.
Driving the news: The policy-setting Federal Open Market Committee left its interest rate target steady at a range of 4.25% to 4.5%, where it has been since December.
However, the median top official at the central bank continues to anticipate bringing the Fed policy rate down to 3.9% by year end, the same as in March, implying two rate cuts ahead.
The consensus projection also implied only one rate cut in 2026, not the two suggested in March.
"Uncertainty about the economic outlook has diminished but remains elevated," the committee said, tweaking language from its previous statement that uncertainty had "increased further."
The decision was unanimous.
By the numbers: In new projections, the median Fed official anticipated 3% inflation this year, up from the 2.7% they penciled in in March.
The median official saw the unemployment rate rising to 4.5% at year-end, up from 4.4% in March.
The median GDP growth forecast was trimmed to 1.4%, from 1.7% in March.
Between the lines: The March projections were made before President Trumps announcement of "Liberation Day" reciprocal tariffs, which sent markets in a tailspin and caused a wave of recession worries.
Since then, the trade war has de-escalated and a wave of deals was promised, though uncertainty among businesses remains elevated and the risk of supply chain disruptions high.
Fed officials are waiting on any policy shifts until it is clearer whether an upsurge in inflation, or worsening in labor market conditions, represents the bigger threat to their mandate of stable prices and maximum employment.
What they're saying: "Look at wages, look at job creation — they're all at healthy levels," Fed chair Jerome Powell said during a news conference.
"Now I would say you can see perhaps a very, very slow continued cooling, but nothing that's troubling at this time," he added.
"As long as the economy is solid, as long as we're seeing the kind of labor market that we have and reasonably decent growth and inflation moving down, we feel like the right thing to do is to be where we are," Powell said, adding the Fed expects to learn more over the summer on tariffs.
Yes, but: The Trump administration has seized on recent benign inflation readings to accuse the Fed and Powell of being asleep at the wheel and unduly reluctant to cut rates.
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