United States: Central Bank leaves rates unchanged in June
Latest bank decision: At its meeting ending on 18 June, the Central Bank decided to maintain the target range for the federal funds rate at 4.25–4.50%, where it has been since last December.
Uncertain outlook and above-target inflation drive hold: The Bank decided to stay put in light of inflation which is still above the 2.0% target despite dipping so far this year, and elevated economic uncertainty under Donald Trump’s presidency as a result of volatile trade policy.
Rate cuts still the base scenario: The Fed’s median projection was for 50 basis points of rate cuts later this year, which is broadly in line with the Consensus among our panelists. Uncertainty over the interest rate outlook is unusually large due to Trump’s unpredictable trade policy and doubts over the effects of this policy on the economy and inflation.
Panelist insight: On the outlook, United Overseas Bank’s Suan Teck Kin said:
“We continue to hold our view of three 25-bps cuts in 2025 to be executed at the Sep, Oct and Dec FOMC meetings. This will bring the Fed Funds Target rate (FFTR) to 3.75% (upper bound of FFTR) by end-2025. We are also keeping our view for the two rate cuts for 2026, implying a lower terminal FFTR of 3.25% in 2026.”
Nomura analysts were more hawkish:
“Rising inflation is likely to keep the Fed on hold until tariff-led inflationary pressures begin to fade, barring a clear sign of a recession. We expect the Fed to cut this year in December and follow with two subsequent cuts in Q1 2026, reaching a terminal rate of 3.625%.”