Fed holds rates steady, signals possible cuts by year-end

The U.S. Federal Reserve kept its benchmark interest rate unchanged Wednesday, holding steady at 4.25% to 4.50% as expected.

However, policymakers signaled plans to reduce borrowing costs by half a percentage point before the year ends.

The decision marks the second consecutive pause in rate cuts since January.

The Fed also raised its 2025 inflation forecast while downgrading its economic growth outlook.

“Uncertainty around the economic outlook has increased,” the Fed said in a statement after a two-day meeting.

The central bank also removed its prior assertion that “risks to achieving its employment and inflation goals are roughly in balance".

The Fed had previously slashed rates three times in late 2024, responding to weakening employment data and easing inflation.

Since then, inflation has climbed back toward a 3% annual increase, leaving the central bank grappling with rising prices and the risk of slowing economic growth.

Concerns over U.S. economic stability have intensified in recent weeks, with consumer and business sentiment dampened, spending pulling back, and new tariffs adding to uncertainty.