19
June 2025
US Federal Reserve keeps rates unchanged as caution persists
Adriaan Pask
Chief Investment Officer, PSG Wealth
Event
• The US Federal Reserve (Fed) maintained the federal funds rate at 4.25%–4.50% for a fourth consecutive meeting in June 2025. This decision was broadly in line with expectations, as policymakers adopt a cautious approach to fully assess the economic impact of President Donald Trump’s policies, particularly those concerning tariffs, immigration and taxation.
• Policymakers observed that while uncertainty surrounding the economic outlook has eased, it remains elevated. Despite this, the Fed continues to forecast two interest rate cuts later this year. However, it currently anticipates only a single quarter-percentage-point reduction in both 2026 and 2027.
The Impact
• US stocks fluctuated on Wednesday as investors responded to the Federal Reserve’s decision to leave interest rates unchanged, alongside Fed Chair Powell’s cautious tone in the face of growing geopolitical and economic uncertainty.
• The S&P 500 ended marginally lower, the Dow Jones Industrial Average declined by 44 points, while the Nasdaq edged up by 0.10%.
• The US Dollar Index climbed above 99 points on Thursday, continuing its upward trajectory for the week. However, the Fed’s reaffirmation of a cautious, data-dependent approach to future monetary policy notably influenced the dollar’s strength.
• The 5-year US Treasury yield decreased to 3.95%, while the yields for the 10-year and 30-year notes came in at 4.39% and 4.89%, respectively.
The Assessment
• The Fed’s latest policy statement signals mounting concern over economic uncertainty within the United States. While interest rates remain unchanged, the decision reflects a hawkish policy stance, with the central bank cautioning that upside risks to inflation could persist in the coming months.
• While we remain attentive to the potential impact of a prolonged and difficult interest rate cycle on portfolio performance, we are confident in our current positioning. We continue to monitor developments closely and remain committed to identifying opportunities within an evolving and uncertain economic landscape.
• The next interest rate decision will be announced on Wednesday, 30 July 2025.