Fed Holds Interest Rates Steady Amid Solid Economic Indicators

The Federal Open Market Committee (FOMC) of the United States Federal Reserve has chosen to maintain interest rates within the target range of 4.25% to 4.50%. This decision comes despite pressure and criticism from U.S. President Donald Trump. The Fed’s stance reflects a continued focus on economic stability and inflation control.

This latest pause follows previous holds announced in January, March, and May, after a series of three consecutive rate cuts that began in September.

Those cuts marked the first time interest rates had been lowered since March 2020

In its official statement, the Fed acknowledged fluctuations in net exports but noted that “recent indicators suggest that economic activity has continued to grow at a solid pace.” The labor market remains strong, with unemployment staying low and job creation consistent. However, the Fed emphasized that inflation continues to be somewhat elevated, which remains a key concern in its monetary policy.

Economic data from the first quarter of 2025 showed a slight annualized decline of 0.2% in GDP, following a 2.4% increase in the final quarter of 2024. In the job market, 139,000 nonfarm payroll jobs were added in May, keeping the unemployment rate steady at 4.2%.

As for inflation, the personal consumption expenditures (PCE) price index — the Fed’s preferred measure — registered at 2.1% in April, a drop of two-tenths of a percentage point. The core PCE index, which excludes food and energy prices, declined slightly as well, closing at 2.5% year-over-year.

Why the Fed keeps rates steady

These figures reflect a mixed but generally stable economic picture. While inflation has eased somewhat, it remains above the Fed’s long-term target. Meanwhile, employment and economic activity appear resilient, justifying the Fed’s decision to hold rates steady.

This cautious approach suggests that the Fed will continue monitoring economic data closely before making any further adjustments to interest rates in the coming months.

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First published in EL INDEPENDIENTE. A third-party contributor translated and adapted the article from the original. In case of discrepancy, the original will prevail.

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