Durrant Pate/Contributor

The Federal Reserve has decided to maintain the target range for the federal funds rate at 4.25% to 4.50%, reaffirming its commitment to achieving maximum employment and returning inflation to its 2% objective over the longer run.

In arriving at its decision, which was announced today, Federal Open Market Committee (FOMC) notes that while recent fluctuations in net exports have influenced the data, broader indicators suggest that economic activity continues to expand at a solid pace. 

Also, the American labour market remains strong with a low unemployment rate and robust job gains, although inflation remains somewhat elevated. The FOMC points out that uncertainty around the economic outlook has diminished but remains elevated, and it remains attentive to risks on both sides of its dual mandate.

In support of its goals, the FOMC will continue reducing its holdings of Treasury securities and agency debt and mortgage-backed securities. Emphasised a data-dependent approach, The FOMC says it will carefully assess incoming data, the evolving economic outlook, and the balance of risks when considering the extent and timing of any additional policy adjustments. 

The committee is reiterating its readiness to adjust the stance of monetary policy as appropriate should risks emerge that could impede progress toward its employment and inflation goals. 

In making its assessments, the Fed will also consider a wide range of information, including labour market conditions, inflation pressures and expectations, and financial and international developments.

Summary of Economic Projections – June 2025

• Real GDP Growth: The median projection for 2025 is 1.4%, rising modestly to 1.6% in 2026 and 1.8% in 2027, reflecting expectations of a gradual return to trend growth. The longer-run projection remains at 1.8%.
• Unemployment Rate: The unemployment rate is expected to remain relatively stable, with a median forecast of 4.5% in 2025, 4.4% in 2026, and 4.3% in 2027, aligning closely with the longer-run estimate of 4.2%.
• Inflation (PCE): Inflation is projected to ease gradually. The median projection for headline PCE inflation is 3.0% in 2025, falling to 2.4% in 2026 and 2.1% in 2027, approaching the Fed’s 2% target.
• Core PCE Inflation: Core inflation, which excludes food and energy, is expected to follow a similar path: 3.1% in 2025, 2.4% in 2026, and 2.1% in 2027.
• Federal Funds Rate: The median projection for the federal funds rate is 3.9% in 2025, declining to 3.6% in 2026 and 3.4% in 2027, with a longer-run estimate of 2.5% to 3.0%, suggesting a gradual easing of monetary policy as inflation pressures subside.