Fed's Powell: Policy remains modestly restrictive

Federal Reserve Chairman Jerome Powell explained the decision to leave the policy rate unchanged at the 4.25%–4.50% range following the June meeting and responded to questions during the post-meeting press conference.

Follow our live coverage of the Fed rate decision and the market reaction.

Powell's press conference highlights

• Inflation has been running somewhat above goal.
• Current policy stance leaves us well positioned.
• PDFP, which excludes net exports, grew at a solid rate.
• Sentiment soured, reflecting trade policy concerns.
• Unemployment has stayed in a narrow range, low.
• Labour market broadly in balance.
• The labour market is not a source of inflation.
• Labour conditions consistent with maximum employment.
• Estimate total PCE prices rose 2.3%, core 2.6% in May.
• Near-term inflation expectations have moved up, tariffs driving factor.
• Most measures of long-term inflation expectations are consistent with 2% inflation.
• Effects of tariffs will depend on level, and increases this year will likely weigh on economic activity and push up inflation.
• Avoiding persistent inflation ultimately depends on keeping long-term inflation expectations well-anchored.
• Obligation is to keep one-time price increases from becoming an ongoing inflation problem.
• Without price stability, one cannot achieve long periods of low unemployment.
• For the time being, well-positioned to wait to learn more before considering policy adjustments.
• Fed policymaker projections are subject to uncertainty, which is unusually elevated.
• Fed policymaker projections are not a plan.
• After the framework review is wrapped in late summer, will consider any changes to communications.
• Had three months of favourable inflation readings, welcome news.
• Core services inflation has been grinding down.
• We’ve had goods inflation moving up a bit and expect to see more of that in summer.
• Expect to see more in goods inflation this summer.
• Takes some time for tariffs to work their way to the consumer.
• Beginning to see some tariff effects and expect more in coming months.
• Many companies expect to pass some or all of the tariff effect through to the consumer.
• Appropriate to hold where we are as we learn more.
• Policy in a good place.
• Well-positioned to react to developments.
• Can’t assume inflation will just move up and then back down, as projections show.
• In looking at Fed policy path projections, focus on the near term; it's hard to forecast the longer term.
• Adapting in real-time to estimates of how high tariffs will be.
• In a statement, it said uncertainty about the economy has diminished; that’s a line from the Fed’s Teal Book.
• Uncertainty peaked in April.
• Uncertainty peaked in April and has come down.
• Sentiment has come up from very low levels, though still depressed.
• Housing situation is a longer-run problem.
• Can ‘perhaps’ see slow, continued cooling in the labour market, but nothing that’s troubling.
• No one holds rate path projections with a great deal of conviction.
• Can make a case for any of the rate paths in the projections.
• Remember how much uncertainty we face.
• Know that the time will come when we’ll have more confidence.
• As long as we have the kind of labour market we have and inflation coming down, the right thing to do is hold rates.
• Expect to learn a great deal more over summer.
• Don’t know where tariffs will settle out; highly uncertain.
• Need to see some actual data to make decisions.
• Had strong support for today’s decision.
• Rate path differences reflect the diversity of economic forecasts, including inflation.
• As we get more data, the differences in rate forecasts will be smaller.
• Split in projections may also reflect differences in assessments of risks.
• If just looking backward at data, you would want rates closer to neutral, but we expect a meaningful amount of inflation in coming months.
• Economy has been resilient; part of that is our stance.
• Supply and demand in the labour market have kept the unemployment rate in a reasonable place.
• Compared to September 2024 when we cut rates, the inflation forecast for the current year is higher due to tariffs.
• We will restore 2% inflation on a durable, sustainable basis.
• The best thing the Fed can do is deliver price stability and full employment.
• We have to keep rates high to get inflation all the way down.
• Policy is now modestly restrictive.
• Will take confidence that inflation is coming down; without tariffs, that confidence would be building.
• Hard to know how we should react until we see the size of the tariff effects.
• The cost of the tariffs has to be paid; some will fall on the end consumer.
• The labour market is not crying out for a rate cut.
• The US has been a leader in understanding and measuring our economy.
• The Fed framework should not depend on the chair or be tied to a particular chair.

This section below was published at 18:00 GMT to cover the Federal Reserve's policy decisions and the immediate market reaction.

The United States (US) Federal Reserve (Fed) announced on Wednesday that it left the policy rate, federal funds rate, unchanged at the range of 4.25%-4.5% following the June policy meeting. This decision came in line with the market expectation.

In the policy statement, the Fed noted that the unemployment remains low, with labor market conditions staying solid. The US central bank also said that recent indicators suggest that the economic activity has continued to expand at a solid pace, while inflation remains somewhat elevated.

Alongside the policy statement, the Fed also released the revised Summary of Economic Projections (SEP), also known as the dot plot. The document showed that policymakers still see a 50 basis points (bps) reduction in the policy rate in 2025 but now forecast only a 25 bps cut in 2026, against the 50 bps projected in March's SEP.

Key takeaways from Fed's SEP

"Fed officials' median view of fed funds rate at end-2025 3.9% (prev 3.9%)."

"Fed officials' median view of fed funds rate at end-2027 3.4% (prev 3.1%)."

Fed officials' median view of fed funds rate at end-2026 3.6% (prev 3.4%)."

"Fed officials' median view of fed funds rate in longer run 3.0% (prev 3.0 %)."

"Fed projections show 7 of 19 officials see no cuts in 2025, 2 see one cut, 8 see 2 cuts, 2 see 3 cuts."

"Fed projections imply 50 bps of rate cuts in 2025, 25 bps in 2026 and 25 bps in 2027."

"Fed projections show slower Gross Domestic Product (GDP) growth, slightly higher unemployment and somewhat higher inflation than in March forecasts."

"Fed policymakers see 4.5% unemployment rate at end of 2025 versus 4.4% in March projections."

"Fed policymakers see end-2025 PCE inflation at 3.0% versus 2.7% in March; core seen at 3.1% versus 2.8%."

"Fed policymakers see 1.4% GDP growth in 2025 versus 1.7% in March, see longer-run growth at 1.8% vs 1.8% in March."

Market reaction to Fed policy announcements

The US Dollar Index edged slightly lower with the immediate reaction and was last seen losing 0.2% on the day at 98.62.

This section below was published at 10:00 GMT as a preview of the Federal Reserve's policy announcements.

• The Federal Reserve is expected to leave the policy rate unchanged for the fourth consecutive meeting.
• The revised Summary of Economic Projections, which includes the dot plot, could offer key clues about the policy outlook.
• The US Dollar could gather strength if policymakers project a single rate cut in 2025.

The United States (US) Federal Reserve (Fed) will announce monetary policy decisions and publish the revised Summary of Economic Projections (SEP), the so-called dot plot, following the June policy meeting on Wednesday. 

Market participants widely anticipate the US central bank to leave policy settings unchanged for the fourth consecutive meeting, after cutting the interest rate by 25 basis points (bps) to the 4.25%-4.50% range in December.

The CME FedWatch Tool shows that investors virtually see no chance of a rate cut in June, while pricing in about a 15% probability of a 25 bps reduction in July. 

The odds of the Fed opting for the first rate reduction of the year in September currently holds around 70%. Hence, revised projections in the dot plot and comments from Fed Chairman Jerome Powell in the post-meeting press conference could provide key hints on the timing and the number of rate cuts.

In March, the SEP showed that policymakers were projecting a total 50 bps reduction in the policy rate in 2025, while forecasting a 1.7% Gross Domestic Product (GDP) growth and a 2.8% core Personal Consumption Expenditures (PCE) inflation for the year. 

Before the Fed went into the blackout period, several policymakers reiterated the need to remain patient and assess the economic developments before deciding on the next policy step. 

Minneapolis Fed President Neel Kashkari said that the labour market is showing some signs of slowing down, but noted that the central bank must stay in wait-and-see mode to see how the economy responds to the uncertainty. Similarly, Philadelphia Fed President Patrick Harker noted that they still have no idea how shifting economic policies will affect the outlook and said that they need to wait while the economy faces many different possible paths. 

Previewing the Fed’s May meeting, analysts at TD Securities said, “the FOMC is widely expected to keep rates unchanged for a fourth consecutive meeting next week. As uncertainty around the economic outlook remains elevated, we look for the FOMC to remain patient regarding its next policy decisions.”

“The revised SEP will likely show lower growth, higher unemployment, and higher inflation forecasts. We do not expect a shift in the median dots,” the analysts added.

When will the Fed announce its interest rate decision and how could it affect EUR/USD?

The US Federal Reserve is scheduled to announce its interest rate decision and publish the monetary policy statement, alongside the revised dot plot, on Wednesday at 18:00 GMT. This will be followed by Fed Chairman Jerome Powell's press conference starting at 18:30 GMT. 

In case the revised SEP shows that policymakers are still expecting a total of 50 bps reduction in interest rates this year, the USD could come under renewed selling pressure with the immediate reaction. A downward revision to GDP growth and/or inflation forecasts could intensify the USD sell-off.

Conversely, the USD could gather strength against its rivals if the dot plot highlights that officials now anticipate only one rate cut this year. Investors are currently pricing in about a 70% probability that the Fed will lower the policy rate at least twice in 2025. This market positioning suggests that the USD has a strong bullish potential in case of a hawkish surprise. 

Chairman Powell’s comments could further influence the USD’s valuation. In case Powell adopts an optimistic tone about the inflation outlook and suggests that they could shift their focus to the labor market, the USD is likely to have a hard time outperforming its rivals. On the flip side, the currency could hold its ground if Powell reiterates the need for a patient stance, citing the heightened uncertainty surrounding the state of the economy in the near future.

Eren Sengezer, European Session Lead Analyst at FXStreet, provides a short-term technical outlook for EUR/USD:

“The near-term technical outlook suggests that the bullish bias remains intact, with the Relative Strength Index (RSI) indicator on the daily chart holding comfortably above 60. Additionally, EUR/USD trades well above the 20-day Simple Moving Average, currently located at 1.1420”

“On the downside, the mid-point of the four-month-old ascending regression channel forms the immediate resistance level at 1.1630. In case EUR/USD rises above this level and confirms it as support, it could face the next resistance at 1.1800 (static level, round level) before targeting 1.1900-1.1910 (round level, upper limit of the ascending channel). Looking south, support levels could be spotted at 1.1420 (20-day SMA), 1.1330 (50-day SMA, lower limit of the ascending channel) and 1.0980 (100-day SMA).”