Federal Reserve again leaves interest rates unchanged, citing caution

June 18 (UPI) — The U.S. Federal Reserve held key interest rates steady Wednesday but said it still sees the possibility of two cuts later this year, with expectations that President Donald Trump‘s tariff policies will spike inflation and slow economic growth.

The Federal Open Market Committee kept its borrowing rate in the 4.25%-4.5% range where it’s been since December.

Earlier Wednesday it had been highly expected that the Fed would leave interest rates unaltered. However, the committee indicated that two cuts by the end of the year were not out of the question, with a chance of four future interest rate cuts being a possibility by 2027.

“The Fed’s main message at the June meeting will be that it remains comfortably in wait-and-see mode,” Bank of America economist Aditya Bhave said in a statement earlier in the day.

The Fed reported on inflation trends and other data in the midst of economic uncertainty.

Economic experts pointed to future so-called “stagflationary” economic pressures with the likelihood of the nation’s GDP pushing at a pace of more than 1% and inflation as high as 3%.

“Uncertainty about the economic outlook has diminished but remains elevated,” according to the FOMC, adding how it was being “attentive to the risks to both sides of its dual mandate.”

The uncertainty stems not only from the unpredictable application of tariffs and ongoing trade volatility caused by them, but also from world events likely to have an effect on U.S. financial markets such as the Iran-Israel war.

“Investors should focus on [Fed Chair Jerome] Powell’s take on the softening labor data, the recent benign inflation prints and the risks of persistent tariff-driven inflation,” Bhave added.

Earlier, Wall Street economists had believed the Fed would keep interest rates in the 4.25% to 4.5% range.

The Fed has not cut interest rates so far during the Trump administration. Despite President Donald Trump aggressively pushing Powell to cut interest rates, he has declined, saying there is too much uncertainty in financial markets, largely because of tariffs that have been imposed and threatened.