What you need to know before the Fed decision: What will Powell say?

Finally, it is almost certain that the Fed, which lowered interest rates in December 2024, will also decide to keep them unchanged in this evening's meeting. In the Fed WatchTool, which measures market expectations, there is a 99.9% expectation that the Fed will keep interest rates in the range of 4.25-4.50%.

Powell's words will be more important

The words of the institution's president Powell during the press conference will be much more important than the Fed's decision. It is expected that Powell will especially comment on tariffs. As a reminder, the Fed chairman met with Trump at the White House in recent weeks. Donald Trump has constantly stated in his statements to the press and on social media that the Fed and Powell need to lower interest rates. Most recently, after the inflation data was announced, Trump said, "A 100 basis point cut is needed."

Inflation is decreasing, but...

As is known, the Fed initiated a sharp and aggressive interest rate hike cycle in March 2022, and exactly 3 years ago, in June 2022, US inflation reached its peak at 9%. That month, the Fed also raised rates by 75 basis points and continued with further hikes of 75 basis points in the following 3 meetings.

A lot of time has passed since that period, and today the headline inflation in the US has declined to 2.4%. However, the Fed is worried that this low rate will not be permanent, especially due to tariffs, and cannot continue with interest rate cuts.

It had started before the election

As is known, the Fed cut interest rates for the first time in a long time last September. The 50 basis point cut was followed by two 25 basis point cuts in November and December. However, after these cuts, the inflation rising back to 3% caused the institution to put the brakes on.

The Iran-Israel war has also started to scare.

Oil prices, which fell after Trump's election as US president, started to rise again with the Iran-Israel conflict. The price of oil per barrel, which is at the level of 75 dollars, does not fall much and cannot go up further due to the fact that it is not known in which direction the war will evolve.

The uncertainty here could also contribute to the rise of inflation in the world. It is unclear whether Powell will comment on this, but it is highly likely that this question will be directed at him during the press conference. The words of the Fed chairman here will also be significant.

Published: June 18, 2025 1:35 PM Last Updated: June 18, 2025 1:52 PM