The US Fed has kept interest rates unchanged for the fourth consecutive time, with officials still expecting two interest rate cuts within the year.

In the early hours of Thursday (June 19) Beijing time, the US Fed announced that it would maintain the target range for the federal funds rate at 4.25% to 4.50%, marking the fourth consecutive decision to keep rates unchanged.

The press release stated that despite fluctuations in net exports affecting US data, recent indicators showed that economic activity continued to expand at a solid pace. The unemployment rate remained low, the labour market conditions remained sound, and inflation remained slightly elevated.

The statement emphasized that the Federal Open Market Committee (FOMC) is committed to achieving maximum employment and an inflation rate of 2% over the longer run. Although uncertainty about the economic outlook has eased somewhat, it remains elevated. The Committee is closely monitoring a range of risks related to its dual mandate.

To support these goals, the FOMC decided to maintain the target range for the federal funds rate at 4.25% to 4.50%. When considering the extent and timing of further adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, changes in the economic outlook, and the balance of risks.

The FOMC stated that it would continue to reduce its holdings of Treasury securities, agency debt, and agency mortgage-backed securities. The Committee is firmly committed to supporting maximum employment and returning inflation to its 2% target.

In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of newly released information for the economic outlook. If risks emerge that could impede the attainment of its goals, the Committee will adjust its policy stance as appropriate.

The Committee's assessment will take into account a wide range of information, including labour market conditions, inflationary pressures and expectations, and financial and international developments.

Alongside the interest rate decision, the US Fed also released the Summary of Economic Projections (SEP):

Participants revised down their growth projections for this year and next: the median projections for GDP growth at the end of 2025, 2026, and 2027 were 1.4%, 1.6%, and 1.8%, respectively. (In March, the projections were 1.7%, 1.8%, and 1.8%.)

Participants revised up their unemployment rate projections for these three years: the median projections for the unemployment rate at the end of 2025, 2026, and 2027 were 4.5%, 4.5%, and 4.4%, respectively. (In March, the projections were 4.4%, 4.3%, and 4.3%.)

Regarding inflation, participants revised up their projections for PCE and core PCE inflation for these three years: the median projections for PCE inflation at the end of 2025, 2026, and 2027 were 3.0%, 2.4%, and 2.1%, respectively. (In March, the projections were 2.7%, 2.2%, and 2.0%.)

The median projections for core PCE inflation were 3.1%, 2.4%, and 2.1%, respectively. (The six inflation figures (with March forecasts at 2.8%, 2.2%, and 2.0%, respectively) were all above the US Fed's 2% target.

The closely watched "dot plot" of interest rate forecasts showed that the median forecast of 19 policymakers for interest rates at the end of 2024 fell within the range of 3.75% to 4.00%, implying a cumulative 50 basis point interest rate cut from current levels by year-end, in line with the outcome of the March meeting.

Nick Timiraos, a journalist dubbed the "Fed whisperer," commented that the US Fed had left open the possibility of interest rate cuts in the second half of the year, but officials would need to see a softening in the labour market or stronger evidence that tariff-induced price increases would be relatively mild.

Timiraos pointed out that the interest rate forecasts highlighted the divergence among the 19 officials: 10 of them expected at least two interest rate cuts this year, a smaller proportion than in March, while two expected one cut. Meanwhile, seven believed there would be no change this year, up from four in March.

The "dot plot" also showed that the median forecast for interest rates at the end of 2026 fell within the range of 3.50% to 3.75%, compared to 3.25% to 3.50% at the March meeting. This implies that they now expect a 25 basis point interest rate cut in 2026, down from the 50 basis point cut they anticipated three months ago.