The Federal Reserve said Wednesday it is holding its benchmark interest rate steady, marking a continuation of its “wait-and-see” approach as it assesses the impact of the Trump administration’s economic policies.

The central bank also expects inflation to worsen in the coming months, but it still foresees two interest rate cuts by the end of this year, the same as it had projected in March.

By the numbers

The central bank on Wednesday said it will maintain the federal funds rate at its current range of 4.25% to 4.5%. 

The rate has remained at that level since President Trump took office in January. The last time the Fed cut rates was in December 2024, when it trimmed rates by 0.25 percentage points.

What does the Fed say about the economy?

In determining rate cuts, the Fed’s goal is keep inflation low and maintain a healthy job market. In its announcement Wednesday, the central bank mentioned solid labor market conditions and an economy that continues to grow at a “solid pace” although it also signaled caution. 

“Uncertainty about the economic outlook has diminished but remains elevated,” the Fed wrote in its announcement.

There has been speculation that Mr. Trump’s tariffs could drive up inflation, but so far it has remained in check. The Consumer Price Index rose slightly in May to 2.4%, up from 2.3% in April. In its announcement Wednesday, the Fed reiterated its goal to bring down inflation to its 2% target.

The job market also continues to chug along, although some economists forecast that it could start to weaken in coming months. 

The central bank also released its latest quarterly projections for the economy and interest rates. It expects that inflation as measured by the Personal Consumption Expenditures Price Index will pick up to 3% by year end, and for unemployment to edge higher to 4.5%, up from the current rate of 4.2%. 

The Fed also signaled it would cut rates just once in 2026, down from two cuts projected in March.

When will the Fed cut rates?

While the Fed is penciling in two rate cuts this year, most economists don’t expect a rate cut at the central bank’s next meeting, scheduled for July 29-30. 

Economists give a roughly 60% probability that the Fed will reduce the federal funds rate at its September 17 meeting, according to financial data firm FactSet.

What does this mean for your money?

The federal funds rate reflects the interest rate banks charge each other for short-term loans. A higher benchmark rate can make borrowing more expensive for businesses and consumers because it helps determine what businesses and consumers pay in interest on loans and credit card debt. 

When the benchmark rate is lowered, loan rates tend to follow, making it less expensive to borrow money. 

With the Fed keeping rates steady, it’s unlikely that borrowers will see near-term relief on their lending costs.

“This is music to the ears of savers, like retirees, that are earning good income on their hard-earned savings,” said Bankrate’s chief financial analyst Greg McBride in an email. “But it underscores the urgency for borrowers to aggressively pay down high-cost credit card debt and offers little hope of a significant drop in interest rates any time soon.”

What has President Trump said about interest rates?

Mr. Trump has repeatedly called on the Fed to slash rates, including on Wednesday morning before the Fed announced its decision. During remarks to the press, Mr. Trump called out Fed Chair Jerome Powell, saying he’s “done a poor job.” 

“We had the highest inflation we ever had and then it came down when I got elected,” he said. “Now we have a man who refuses to lower the Fed rate.” 

The Associated Press

contributed to this report.