June 19, 2025
Fed Holds Steady Hoping for a Summer Signal
KEY SUMMARY POINTS
- The Federal Reserve held the federal funds rate steady in the range of 4.25% to 4.50%.
- The statement was largely unchanged, with language on uncertainty toned down slightly.
- The Fed’s updated projections marked up inflation for 2025 but continued to imply 50 bps of cuts.
- Chair Powell expressed humility, noting the Federal Open Market Committee (FOMC) must “be humble about our ability to forecast” and said the Fed is “well-positioned to wait to learn more.”
DECISION AND STATEMENT TAKEAWAYS
The Federal Reserve held the federal funds rate steady in the range of 4.25% to 4.50%.
The statement was largely unchanged, with the only notable shift being the characterization of uncertainty around the economic outlook. This is now described as “diminished but remains elevated,” replacing the previous phrase “has increased further”.
This adjustment makes sense given the last meeting occurred just a month after Liberation Day, when tariff policies were changing almost daily.
In the press conference, Chair Powell elaborated, noting that “uncertainty really peaked in April and since then has come down”. Nonetheless, he stressed that uncertainty remains “unusually elevated”.
SUMMARY OF ECONOMIC PROJECTIONS (SEP)
This framed the discussion around the updated SEP, with Chair Powell noting, “with uncertainty as elevated as it is, no one holds these rate paths with a lot of conviction”.
The SEP continued to suggest that 50 bps of cuts could be expected this year, as was the case in March.
This was despite a revised outlook for inflation that marked up the core Personal Consumption Expenditures (PCE) inflation estimate for 2025 to 3.1%, from 2.8% in March.
While fewer FOMC participants (14 of 19) saw risks to inflation as weighted to the upside than in March, Chair Powell indicated that “everyone that I know is forecasting a meaningful increase in inflation in coming months from tariffs.”
THE FED REMAINS IN WAIT-AND-SEE MODE
In the press conference, Chair Powell expressed humility noting that the FOMC must “be humble about our ability to forecast” and continued to indicate that the Fed is “well-positioned to wait to learn more about the likely course of the economy”.
When asked about the timing of rate cuts, given the outlook remains clouded by potential tariff effects, Chair Powell said, “We hadn’t expected tariffs to show up much by now”, adding, “we're going to learn a great deal more over the summer on tariffs.”
La version française de cet article sera prête dans les prochains jours.
About the Author
Neil Shankar is CI Global Asset Management’s Economist, responsible for monitoring key macroeconomic trends and shaping CI GAM’s economic outlook. He actively participates in investment and asset allocation discussions, helping guide decision-making.
A leading contributor to CI GAM’s Capital Insights publication, Neil shares in-depth perspectives on evolving economic conditions. He also frequently engages with stakeholders throughout the organization and externally, helping to deepen understanding of the economic landscape. He is regularly quoted in the press for his views on the economy and markets.
With over 10 years of industry experience, Neil joined CI GAM in 2024 after holding similar roles at other major Canadian financial institutions. Neil holds an MA in Business Economics from Wilfrid Laurier University and a BA (Honours) in Economics from The University of Western Ontario.
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