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Mark Chandik

Jun 23, 2025

The Fed Hits Snooze on Policy Moves

It came as no surprise that the Federal Reserve maintained its benchmark rate—the fed funds rate—at 4.25% to 4.50% during last Wednesday’s meeting. Despite the moderation in the rate of inflation, central bankers didn’t hint at any near-term cut in interest rates.

The meeting can be summed up in a few remarks that were centered on tariffs. So, in Fed Chief Powell’s own words—

“The pass-through of tariffs to consumer price inflation is a whole process that’s very uncertain. As you know, there are many parties in that chain,” Powell said at his Wednesday afternoon press conference.

“There’s the manufacturer, exporter, importer, retailer, and consumer. And each one of those is going to be trying not to be the one to pay for the tariff. But together they will all pay. Or maybe one party will pay it all.

“But that process is very hard to predict. We haven’t been through a situation like this. I think we have to be humble about our ability to forecast it. So that’s why we need to see some actual data to make better decisions.”

His remarks can be framed as intentional ambiguity or calculated imprecision. Or, perhaps he’s preserving flexibility, avoiding a definitive stance that might need to be reversed. Fed officials are still mindful of how badly they misjudged inflation in 2021 when they labeled it ‘transitory.’

A revival of inflation remains a concern among policymakers. “The thing that every outside forecaster and the Fed is saying is that we expect a meaningful amount of inflation (my emphasis) to arrive in the coming months… One of our jobs is to make sure that a one-time increase in inflation doesn’t turn into an inflation problem,” Powell said.

While the Fed’s own forecast suggests we may see two rate cuts later in the year, barring unexpected cracks in the labor market, i.e., a jump in layoffs, a rise in the unemployment rate, or weak payroll growth, for now the Fed is in a patient, wait-and-see mode.

author avatar
Mark Chandik

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