Fed Keeps Rates Steady But Still Sees 2 Cuts in 2025

The Federal Reserve kept its benchmark interest rate on hold in the 4.25% to 4.50% range at its June meeting, despite political pressure to make a move. Fed officials still support a “wait and see” approach to rate changes as economic uncertainty persists.

The policymaking Federal Open Market Committee (FOMC) notes in a post-meeting statement that although economic activity continues to expand, inflation remains slightly above the committee’s 2% target.

“Uncertainty about the economic outlook has diminished but remains elevated,” according to the statement.

The committee will continue to assess data on the economy, the statement says, before making any policy changes.

That leaves a lot of uncertainty for consumers about future rate changes.

“With so much uncertainty in the economy, nothing is guaranteed — but I do expect the Fed to stand pat through Labor Day at least,” says LendingTree chief consumer finance analyst Matt Schulz.

His forecast aligns with others who anticipate a cut to the federal funds rate in a couple of months. Just over half of the 105 economists polled by Reuters this month said the Fed would begin cutting rates again next quarter, most likely in September.

Policymakers also released their updated Summary of Economic Projections (SEP) at the June meeting, which includes the “dot plot” chart showing rate predictions over the next few years.

Two rate cuts are still possible in 2025, according to the chart. Also, one cut is expected in 2026 and one in 2027 — one fewer per year than called for in the March SEP.

What is the Fed’s latest dot-plot rate forecast?

The Fed’s SEP includes an updated dot plot with forecasts for future rates and other key economic indicators. How does it work? Each dot on the chart represents one official’s expectations for rates.

The dots in this forecast are widely dispersed, with officials projecting a federal funds rate of 3.4% by 2027.

Other key projections include a slight decrease in economic growth this year to 1.4%, down from 1.7% expected in March. A slight increase in the unemployment rate to 4.5% from March’s 4.4% is also predicted.

Core PCE inflation, which eliminates food and energy prices, is projected at 3.1%. This is the Fed’s preferred measure of savings accounts, as well as payments on credit cards and loans.

The Fed sets a target range with upper and lower limits that are usually 0.25 percentage points apart.

Moves to make with rates still on pause

While the Fed sticks to its wait-and-see stance, you can “make the most of the time you have before rate cuts come,” Schulz says.

“This should be the summer of taking control of your interest rates,” he adds, describing how you can do this in several ways.

1. Shop for the best high-yield savings account.
2. Lock in CD rates.
3. Do whatever else you can to make sure you get the most out of today’s yields.

Carving out some extra cash to put into your deposit accounts would also be wise, Schulz says.

“Of course, that’s easier said than done, especially with how expensive life is in 2025,” he says. “But it is certainly a worthwhile goal while savings rates remain high.”

What the federal funds rate is and how it affects you

The federal funds rate target is established by the FOMC — the Fed’s monetary policy team — at meetings held eight times a year. Federal Reserve leaders set the range for the interest rates that banks charge to borrow from each other overnight.

Above all, the federal funds rate serves as a benchmark to establish other rates. Its movements can affect earnings on savings accounts, as well as payments on credit cards and loans.

The Fed sets a target range with upper and lower limits that are usually 0.25 percentage points apart.

Even shifts in expectations for the federal funds rate can affect rates overall, including long-term rates for products such as bonds, CDs and loans.

When does the Fed meet in 2025?

These are the remaining scheduled Fed meeting dates for 2025:

• July 29-30
• Sept. 16-17
• Oct. 28-29
• Dec. 9-10