The FOMC maintains the fed funds target rate range at 4.25 to 4.50 percent as expected after the June 17-18 meeting. The post-meeting statement was largely the same as the prior one. The current statement noted that the unemployment rate remains low and inflation is still somewhat elevated. The main difference in the two statements is that the language regarding the risks to the economy have been downgraded, although not gone.

The latest statement said, Uncertainty about the economic outlook has diminished but remains elevated compared to risks being on the rise prior to the last meeting in May. The statement said, The Committee is attentive to the risks to both sides of its dual mandate, excising the language about higher risks to unemployment and inflation.

The quarterly update to the summary of economic projections (SEP) that accompanies the statement forecasts slower growth and slightly higher unemployment than in the prior report. Forecasts for the PCE deflator point to noticeably higher inflation in the near term and carrying into 2026. However, the projected appropriate policy path is unrevised for 2025, suggesting two rate cuts of 25 basis points each by the end of this year with a midpoint of 3.9 percent. The path for 2026 and 2027 was for only modest reductions in the fed funds rate. The midpoint for 2026 is revised up to 3.6 percent (previously 3.4 percent) and for 2027 at 3.4 percent (previously 3.1 percent).

This reflects a downward revision for 2025 GDP growth to 1.4 percent (previously 1.7 percent) and for 2026 GDP at 1.6 percent (previously 1.8 percent), while 2027 is unrevised at growth of 1.8 percent. These are mostly below the longer run forecast of up 1.8 percent.

The unemployment rate for 2025 is forecast at 4.5 percent (previously 4.4 percent), 2026 at 4.5 percent (previously 4.3 percent), and 2027 at 4.4 percent (previously 4.3 percent). These are above the longer run forecast of 4.2 percent.

Inflation is expected to decline more slowly in 2025 and into 2026 and 2027. The PCE deflator rise is revised up to 3.0 percent (previously 2.7 percent), 2026 is now up 2.4 percent (previously up 2.2 percent), and 2027 at up 2.1 percent (previously). The core PCE deflator increase is now up 3.1 percent (previously 2.8 percent) for 2025, 2.4 percent (previously 2.2 percent) for 2026, and 2.1 percent (previously 2.0 percent) for 2027. The longer-run expectation for the PCE deflator and core PCE deflator remains at 2.0 percent.

No change expected this time. Watch the quarterly forecast updates.

The FOMC meeting announcement is a policy statement issued at the conclusion of each meeting of the Federal Open Market Committee. It offers updates on economic conditions with special focus on the health of the labor market and the latest on inflation. It also updates the status of the federal funds target which is the FOMC's official policy interest rate. This rate is expressed within a range, such as 1.75 to 2.00 percent. The center of this range is the implied target. The higher this target, the more restrictive monetary policy becomes, the lower this target, the more accommodative policy becomes. Other policy tools are also discussed in the meeting announcement including updates on direct purchases of Treasuries and mortgage-backed securities. Debate is not offered in the statement, just the consensus view is expressed, though the statement does list the total committee vote and how each member voted.

The Fed determines interest rate policy at FOMC meetings. These occur roughly every six weeks and are the single most influential event for the markets. For weeks in advance, market participants speculate about the possibility of an interest rate change at these meetings. If the outcome is different from expectations, the impact on the markets can be dramatic and far-reaching.

The interest rate set by the Fed, the federal funds rate, serves as a benchmark for all other rates. A change in the fed funds rate, the lending rate banks charge each other for the use of overnight funds, translates directly through to all other interest rates from Treasury bonds to mortgage loans. It also changes the dynamics of competition for investor dollars. When bonds yield 5 percent, they will attract more money away from stocks than when they only yield 3 percent.

The level of interest rates affects the economy. Higher interest rates tend to slow economic activity; lower interest rates stimulate economic activity. Either way, interest rates influence the sales environment. In the consumer sector, fewer homes or cars will be purchased when interest rates rise. Furthermore, interest rate costs are a significant factor for many businesses, particularly for companies with high debt loads or who have to finance high inventory levels. This interest cost has a direct impact on corporate profits. The bottom line is that higher interest rates are bearish for the stock market, while lower interest rates are bullish.

The Fed also began quantitative easing during the past recession and, through direct purchases in the market, steadily increased its holdings of Treasuries and mortgage-back securities before pulling back from the program beginning in late 2017. Along with lowering its bond holdings, the Fed began to gradually raise its federal funds target until mid-2019 when, facing slowing global growth, it began to lower its target.

Frequency
Eight times a year.