Fed holds interest rate steady for fourth time in a row

Our live coverage of the Federal Reserve rate decision has ended. Read more here.

The "Fearless Girl" statue stands in front of the New York Stock Exchange on June 18.

A rally faded and stocks wavered on Wednesday after Fed Chair Jerome Powell said it is too soon to fully gauge the economic impact of tariffs, complicating the outlook for the Federal Reserve.

The Dow closed lower by 44 points, or 0.1%. The broader S&P 500 edged lower by 0.03% and the tech-heavy Nasdaq Composite gained 0.13%.

The Fed on Wednesday held its benchmark interest steady, matching Wall Street’s expectations. The Fed in a statement said uncertainty has “diminished” but “remains elevated.”

Stocks initially held on to their gains after the decision was announced before dropping lower during Powell’s afternoon press conference.

Investors digested Powell’s remarks that while uncertainty has peaked, it is still tremendously difficult to forecast the inflationary impact of tariffs.

“The Fed continues to be on high alert for tariff-driven inflation,” said James St. Aubin, chief investment officer at Ocean Park Asset Management. “A healthy labor market is allowing the Fed to remain on hold as the inflation story unfolds.”

“Powell said without tariffs, confidence would be building that inflation is coming down given the recent data,” St. Aubin said. “This was an implicit admission that tariff uncertainty is paralyzing monetary policy.”

Elsewhere in markets, Treasury yields fluctuated during choppy trading as bond investors tried to parse the Fed’s outlook.

A rally in Treasuries was snapped short on Wednesday after Powell’s remarks that the Fed is in no hurry to cut interest rates. The yield 10-year Treasury had been drifting lower across the day before spiking higher during Powell’s remarks.

The 10-year yield traded around 4.39% as of 4 p.m. ET, slightly up on the day. Yields and prices trade in opposite directions.

Federal Reserve Board Chairman Jerome Powell holds a news conference following a Federal Open Market Committee meeting today in Washington, DC.

Federal Reserve Chair Jerome Powell got as close as he has come to political commentary Wednesday during his press conference, when he lamented cuts to government economic data collectors.

Without naming President Donald Trump’s Department of Government Efficiency, the Fed chair said cuts to the scope of economic surveys could create more volatile data.

“The point really is that we are starting to see, you know, layoffs; and important gatherers of data are saying that they’re having to cut back on the size of their surveys,” Powell said. “From our standpoint and the standpoint of businesses, governments and everyone, having really good data on the state of the economy at any given time is a huge public good.”

“I hate to see us cutting back on that because it is a real benefit to the general public that people in all kinds of jobs have the best possible understanding of what’s happening in the economy and what’s likely to happen,” Powell added.

Nevertheless, Powell said the Fed will be able to proceed with its mission.

“The data we get right now, we can do our jobs,” he said. “I’m not concerned that we can’t. That’s not the point.”

Federal Reserve Chair Jerome Powell on Wednesday defended the central bank’s decision to keep its benchmark interest rate steady despite some signs of economic weakness, including in the housing sector.

“The housing market is a longer-run problem and also a short-run problem,” Powell said.

“Basically, the situation is we have a longer run shortage of housing and we also have high rates right now,” he added. “I think the best thing we can do for the housing market is restore price stability in a sustainable way and create a strong labor market.”

Americans have been grappling with an increasingly unaffordable housing market in recent years as mortgage rates remain stubbornly elevated and home prices continue to climb amid a housing shortage.

On Wednesday, new data from the US Census Bureau showed that housing construction plummeted to a five-year low in May amid economic uncertainty.

Stocks bounced around and briefly dropped into the red as Federal Reserve Chair Jerome Powell said the economy is in a “solid position,” but highlighted the difficulty of forecasting the impact of tariffs.

The Dow was flat after rising as much 200 points during Powell’s remarks and then dropping as low as 50 points. The S&P 500 was up 0.1% after dipping into the red, and the Nasdaq was up 0.2%.

Stocks initially pushed higher during Powell’s remarks before taking a dive as the central bank chief discussed the difficulty of forecasting the inflationary impact of tariffs.

“We feel like we’re going to learn a great deal over the summer on tariffs,” Powell said.

“We haven’t been through a situation like this, and I think we have to be humble about our ability to forecast it, so that’s why we need to see some actual data,” he said.

Powell also declined to say whether he would stay on the Fed’s board of governors after his term as Fed chair ends in 2026. The comments come amid heightened tension between Powell and President Donald Trump.

The Fed held rates steady, matching Wall Street’s expectations. Yet it wasn’t enough to prevent a sell-off in stocks as traders digested the Fed chair’s subsequent remarks that there is still tremendous difficulty in forecasting the outlook for inflation, and the central bank is in no rush to cut interest rates.

While stocks dropped lower, the losses were relatively contained. The Fed’s projections for rate cuts showed a slightly more hesitant view of the path for rate cuts next year, but Wall Street traders appeared content that there was not an immediate short-term surprise.

The Fed in a statement had said “uncertainty about the economic outlook has diminished but remains elevated.”

“The Fed’s statement indicates that uncertainty and risks — while still present — haven’t increased further,” said Greg McBride, chief financial analyst at Bankrate.

For its fourth meeting in a row, the Federal Reserve opted to leave unchanged its key short-term interest rate — which influences a host of rates on consumer financial products and bank accounts across the United States.

The annual inflation rate in May rose slightly to 2.4%.

To get steady, low-risk returns that can easily top that, you have a number of options, from stashing money in high-yield bank accounts to investing in money market funds, CDs, municipal bonds, or US Treasuries.

Read more here.

U.S. Federal Reserve Chair Jerome Powell attends a press conference following the issuance of the Federal Open Market Committee's statement on interest rate policy in Washington, today.

In his first reaction to President Donald Trump earlier Wednesday calling him “stupid,” “political” and “too late” at lowering interest rates, Federal Reserve Chair Jerome Powell said at a press conference that he is focused on the work at hand.

“From my standpoint, it’s not complicated,” Powell said. “What everyone on the [policymaking committee] wants is a good, solid American economy with strong labor market and price stability. That’s what we want. Our policy is well positioned right now to deliver that.”

In an unusual bit of bragging, Powell took credit, in part, for America’s strong economy.

“America’s economy has been resilient,” Powell said. “Part of that is our stance. We think we’re in a good place on that, to respond to significant economic developments. That’s what matters. That is what matters to us. Pretty much that’s all that matters to us.”

Asked if he would remain as a board governor if Trump appoints a different Federal Reserve chair when Powell’s term expires next May, he said he’s focused exclusively on the present.

During his post-meeting press conference, Federal Reserve Chair Jerome Powell said he’s encouraged that overall inflation has remained lower than initially expected as tariffs take hold. But some items have already become more expensive, and it remains unclear by how much prices will increase as tariffs continue to make their way through the economy.

Powell said PCs and AV equipment and other electronics, the vast majority of which come from China, have risen in price, and those increases are directly attributable to tariffs.

“So we’re beginning to see some effects. We expect to see more,” Powell said. “We’ve had goods inflation just moving up a bit, and, of course, we do expect to see more of that over the course of the summer.”

Powell noted that many goods being sold at retailers today may have been imported several months ago, before tariffs were imposed. So it could take time before inflation takes hold.

“But many, many companies do expect to put all or some of the effect of tariffs through to the next person in the chain, and, ultimately, to the consumer,” Powell said. “Today, the amount of the tariff effects, the size of the tariff effects, their duration and the time it will take are all highly uncertain. So that is why we think the appropriate thing to do is to hold where we are as we learn more.”

Israeli air defence systems are activated to intercept Iranian missiles over the Israeli city of Tel Aviv early on Wednesday.

The Federal Reserve is patiently watching the trade situation continue to play out, but now it’s also keeping an eye on what’s going on in the Middle East.

The Israel-Iran conflict that erupted last week has escalated in recent days, with the United States mulling military involvement.

The conflict has already resulted in surging global oil prices, which could translate into higher prices in the US if there continue to be disruptions to global energy supply.

And even if energy prices in the US climb, it’s a high bar for the Fed to go back to hiking interest rates.

Fed officials are also keeping tabs on the president’s tax and spending bill, currently being reviewed by the Senate. The provisions in the version of Trump’s megabill that passed the House would would boost the economy 0.8% over about three decades — compared to its estimate of 1.7% for the 2017 bill, the right-leaning Tax Foundation estimates.

President Donald Trump arrives for an event in the East Room of the White House on June 12.

Federal Reserve Chair Jerome Powell has just kicked off his usual post-meeting press conference.

But how much longer will he preside over the central bank? His term ends in May 2026 and President Donald Trump has vowed not to replace him before then.

However, Trump has said he will “very soon” announce his pick to succeed Powell — who has long drawn Trump’s ire for resisting his calls to lower interest rates.

If Trump does announce his pick imminently, that would undermine the current Fed chief’s influence.

This person would be known as a “shadow” Fed chair, experts tell CNN, an unprecedented development in the Fed’s history. No US president has ever announced their nominee for Fed chair several months before the term of the current one ends.

It’s unclear how exactly this person would operate and if they’ll have mainstream views of the economy. Any Fed chair nominee needs approval from the Senate to assume their role.

Scott Bessent, currently serving as Trump’s Treasury secretary, is reportedly under consideration for the top job at the Fed. During a hearing hosted by the House Ways and Means Committee last week, Bessent was asked if he’d consider being Fed chair.

“I am happy to do what President Trump wants me to do,” he said, but added, “I would like to stay in my seat through 2029.”

Kevin Warsh, a former Fed governor who is a supporter of the president, is also in the running to replace Powell, CNN previously reported.

Traders work on the floor at the New York Stock Exchange today.

US stocks were higher and held on to their gains after the Federal Reserve announced it would hold its benchmark interest rate steady, matching expectations.

The Dow was up 124 points, or 0.29%. The broader S&P 500 rose 0.28% and the tech-heavy Nasdaq Composite rose 0.4%.

The Fed in its Summary of Economic Projections raised its forecast for inflation and lowered its expectations for economic growth this year. The Fed still expects two rate cuts this year, matching the forecast from March.

Investors will be focused on Fed Chair Jerome Powell’s press conference, which kicks off at 2:30 p.m. ET.

An exterior view of the Marriner S. Eccles Federal Reserve building, in January 2024, in Washington.

Federal Reserve officials are still penciling in two rate cuts this year, the same number they predicted at March’s monetary policy meeting. That’s according to new median forecasts released Wednesday, as part of the Fed’s Summary of Economic Projections, commonly referred to as the “dot plot.”

Beyond the number of rate cuts, here’s what else changed in their median forecast for 2025 from March:

Federal Reserve Chair Jerome Powell speaks at the Thomas Laubach Research Conference held by the Federal Reserve Board of Governors on May 15 in Washington, DC.

The Federal Reserve held interest rates steady again Wednesday as officials continue to wait for the fallout of President Donald Trump’s sweeping policy changes.

The central bank left its benchmark lending rate unchanged at a range of 4.25% to 4.5%, where it has been since January.

Economists widely expect Trump’s erratic trade war to push up prices and eventually cause unemployment to climb.

So far, Trump’s tariffs have resulted in a surge of imports into the US, which has taken a toll on economic growth. However, inflation hasn’t climbed and the labor market remains in decent shape.

While President Donald Trump says Federal Reserve Chair Jerome Powell is “stupid” for refusing to cut rates, economist Mark Zandi argues that keeping rates steady is “exactly” the right move.

The Fed strategy is logical because there is still so much uncertainty over the trade war and how historically high tariffs will impact inflation, Zandi told CNN in a phone interview on Wednesday.

“It just doesn’t make sense for the Fed to be cutting rates,” said Zandi, chief economist at Moody’s Analytics. “All the forecasts suggest that inflation is going to rise.”

Although Trump officials have cheered tame inflation readings, Zandi said it’s “premature” to conclude tariffs won’t at least temporarily boost inflation.

Trump argued on Wednesday that the Fed should slash interest rates by two to two-and-a-half percentage points, an extreme view that is far from the gradual cuts modeled by many investors and economists.

Zandi cautioned that if the Fed prematurely cuts short-term rates, it could backfire by spooking the market.

“If bond investors lose faith that the Fed is focused on stable inflation, they would push up long-term rates,” Zandi said. “And that would be counterproductive, moving rates in a direction that nobody wants to see.”

US stocks were higher midday ahead of the Federal Reserve’s decision on interest rates, set to be announced at 2 p.m. ET.

The Dow was up 105 points, or 0.25%. The broader S&P 500 rose 0.3% and the tech-heavy Nasdaq rose 0.44%. The three major indexes were trading below their highest levels of the day.

Wall Street’s fear gauge, the CBOE Volatility Index, was down 6%, signaling relative calm. CNN’s Fear and Greed index was in “neutral.”

Markets have been relatively muted so far. That could shift this afternoon as traders listen to Fed Chair Jerome Powell’s press conference at 2:30 p.m. ET.

“With confusion everywhere, we’re anxious to hear from Powell today,” Greg Valliere, chief US policy strategist at AGF Investments, said in a note. “He’s in a bind — the economy appears to be softening and virtually all policy issues in Washington are unclear.”

A trader works on the floor of the New York Stock Exchange at the opening bell on June 2.

Investors are all but certain the Federal Reserve will hold interest rates steady at this month’s meeting. Far less certain, however, is what the Fed will do at upcoming meetings this year and next year.

That’s why investors will be paying much closer attention to the Fed’s so-called “dot plot,” set to be released at 2 p.m. ET, than the Fed’s announcement on interest rates, which also comes out then.

The dot plot refers to the Fed’s Summary of Economic Projections, a quarterly forecast on the economic outlook from all 12 regional Fed bank presidents and the seven members of the Fed’s board of governors.

Their forecasts are anonymous and are displayed simply as a dot on a plot — hence the moniker.

Among the projections Fed officials have to make about the economy for the remainder of this year, 2026, 2027 and over the longer run is where they believe interest rates should be to fulfill their mandate for price stability and maximum employment. In other words, the dot plot will reveal how many more rate cuts we could expect this year and further out in the future.

But there’s a major caveat: These are simply projections, and could change as the economic conditions evolve, as Powell has repeatedly said. And given all the uncertainty clouding the economic outlook currently stemming from tariffs, the conflict between Israel and Iran and the possibility of a new major tax cuts and spending bill taking effect, Fed officials’ forecasts should be taken with an even greater grain salt.

The most recent dot plot from March’s meeting indicated the median forecast was for two rate cuts this year. But given that we’re already halfway through the year and officials have expressed a preference for waiting to see how economic developments play out before cutting rates, they could pencil in fewer — or even zero — rate cuts at all this year.

A person walks past cars displayed for sale at a dealership on April 7 in Glendale, California.

Retail sales fell by 0.9% in May from the prior month, the Commerce Department said Tuesday, down sharply from April’s downwardly revised 0.1% decline. That was the steepest monthly decline since January and worse than the 0.7% decrease economists projected in a poll by data firm FactSet.

The figures are adjusted for seasonal swings but not inflation.

The drop was mostly due to plummeting car sales. Excluding those purchases, retail sales were down a more modest 0.3%.

Early in the spring, Americans rushed to front-load purchases of big-ticket items, especially cars, to beat President Donald Trump’s stiff tariffs. That sent retail sales surging in March, but spending has downshifted markedly since then.

May’s report adds to evidence that Americans are becoming cautious with their spending, which could reverberate throughout the economy if it persists.

The risk now is that of an “onset of a more pronounced slowdown in the economy, driven not necessarily by the actual tariffs but instead by a surge in anxiety that led to a front-loading in demand and will now lead to a demand cliff,” Gregory Daco, chief economist at Ernst & Young, told CNN’s Matt Egan in an interview.

President Donald Trump has not only demanded that the Federal Reserve lower interest rates, but also that those rate cuts be supersized.

Last week, after the Labor Department reported that the Consumer Price Index rose less than expected in May, Trump on his social media platform praised the data as “GREAT NUMBERS!”

“FED SHOULD LOWER ONE FULL POINT. WOULD PAY MUCH LESS INTEREST ON DEBT COMING DUE. SO IMPORTANT!!!” he wrote. It wasn’t the first time Trump has called for a full-point rate cut.

Trump has said the massive interest rate payments the federal government pays is why he wants the Fed to lower borrowing costs. Speaking with reporters at the White House last week, Trump, referring to Chair Jerome Powell, said that “we’re going to spend $600 billion a year, $600 billion because of one numbskull that sits here (and says), ‘I don’t see enough reason to cut the rates now.’”

The Fed, however, doesn’t consider the government’s finances when setting rates. Fed officials focus on achieving their so-called dual mandate of stable prices and maximum employment.

And the size of each rate adjustment is congruent with the economic reality at that moment. For example, when inflation was running at 40-year highs in 2022, the Fed was hiking by as much as three-quarters of a point at a time. Equally, when the economy was ailing during the onset of the Covid-19 pandemic, the Fed cut rates aggressively.

European Council President Antonio Costa, Japan's Prime Minister Shigeru Ishiba, Italian Prime Minister Giorgia Meloni, French President Emmanuel Macron, Canada's Prime Minister Mark Carney, U.S. President Donald Trump, British Prime Minister Keir Starmer, German Chancellor Friedrich Merz and European Commission President Ursula von der Leyen pose for a family photo during the G7 Summit, in Kananaskis, Alberta, Canada, on June 16.

President Donald Trump was initially scheduled to spend three days in the Canadian Rockies meeting with world leaders as part of the annual G7 summit. He departed two days early, though, to head back to Washington to meet with his national security team as tensions escalated between Iran and Israel.

Before his departure, he held bilateral meetings with European Commission President Ursula von der Leyen, Canadian Prime Minister Mark Carney and British Prime Minister Keir Starmer.

While trade came up in all the discussions, no new deals were announced. However, Starmer and Trump finalized an agreement they unveiled last month.

Outside of the bilateral discussions, Trump attended a G7 group dinner. Before leaving, he also gave his blessing to a statement published by the G7 calling for “a resolution” to the Middle East conflict, CNN reported on Monday.

Shipping containers are stacked at a port in Shanghai, China, on June 9.

Since the Federal Reserve’s prior monetary policy meeting that concluded on May 7, there have been some significant changes to the tariff rates the United States has on other nations’ goods.

The biggest was that the US and China agreed to drastically roll back tariffs on each other, with China lowering its minimum tariff on American goods to 10% from 125% and the US cutting rates to 30% from 145%. That was initially supposed to be in effect for 90 days as negotiations continued, but earlier this month President Donald Trump and members of his administration said both nations agreed to maintain those rates going forward.

Then came a potentially game-changing court ruling that President Donald Trump overstepped his authority by using a national emergency to impose most of his tariffs. That case is being appealed and while that process plays out, the tariffs in question will remain in place.

Trump also doubled tariff rates across steel and aluminum imports to 50%, with the exception of the United Kingdom, which formalized the terms of a trade deal with Trump earlier this week at the G7 summit.

It remains to be seen what will happen come July 9, the deadline Trump has set for dozens of countries to make trade deals with him to avoid possibly facing higher tariffs.

Read more here.