Dude, don’t give up yet.
Consumers, businesses and investors ready to tap into lower interest rates should expect to be disappointed when the Federal Reserve Board’s key policy makers meet this week.
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But wait, there’s more!
Hints will abound as to whether there will be an aggressive drop in interest rates later this year.
Related: Fed interest rate decision looms as battle over cuts takes surprising turn
Fed watchers say a critical quarterly chart from the Federal Open Meeting Committee (FOMC) will offer clues as to when the tepid post-pandemic economy will allow a prudent easing of the crucial Federal Funds Rate.
Jerome Powell, chairman of the US Federal Reserve, during the Society For Advancing Business Editing And Writing (SABEW) annual conference in Arlington, Virginia, US, on Friday, April 4, 2025. President Donald Trump called on Powell to slash interest rates, reiterating his longstanding desire for the central bank to keep rates low to stoke consumer demand. Photographer: Tierney L. Cross/Bloomberg via Getty Images
Fed, White House battle over interest rates
Lower interest rates can’t come soon enough for President Donald Trump, who’s been blasting Fed Chair Jerome Powell with escalating demands for a deep cut since taking office five months ago.
Trump maintains that lower interest rates are crucial to keep the U.S. economy from sliding into a recession.
The Fed’s dual unemployment-inflation mandate requires a cautious approach to keep both relatively low and stable. High interest rates lower inflation but cut jobs. Lower interest rates lower unemployment rates but increase inflation.
Trump’s tariffs—which have a July 9 deadline—and his “big, beautiful” tax bill pending in Congress give economists chills.
That’s because while the May jobs and inflation reports were cooler than expected, the impact of the tariffs and the bill will likely lag three to six months before showing up in consumer spending habits and job creation.
Related: Fed official revamps interest-rate cut forecast for rest of this year
The Federal Funds Rate is currently between 4.25 and 4.50%. It indirectly or directly impacts the cost of borrowing money for all Americans.
The FOMC controls the Federal Funds Rate, which banks charge each other overnight to borrow money.
This impacts Treasury bond yields, crucial to determining how much banks charge for mortgage rates.
The FOMC last cut the Federal Funds Rate in December 2024. Trump wants an immediate slash of 2%, up from his earlier demand of 1%, saying this would add $600 billion back in American wallets.
Trump’s ire at Powell includes slurs like “numbskull” and threats to nominate a “shadow president” before the Fed chair’s term expires in May 2026.
FOMC hints about next interest rate cut
In its June 17-18 monthly meeting, the FOMC is not expected to act on the Federal Funds Rate.
What it will reveal, however, is its quarterly “dot plot.” This chart displays where each of the 19 FOMC members thinks the Federal Funds Rate will be for the current year, the next two years, and the long term.
Key economic indicators used to determine the “dots’’ on the chart include:
Changes in real GDPCore Personal Consumption Expenditures (PCE)Core inflationUnemployment rate
The forecasts are not set in stone. The March 2025 dot plot projected two 0.25% rate cuts this year, two more o.25% in 2026, and one 0.25% in 2027.
This was before the thrust of tariff-driven inflation risks and potential hikes in the federal deficit were known.
Market watchers say the next possible rate cut could come in September, and that may be it for the year.
Bank of America analysts, in a note to clients last week, said it was unlikely there would be additional cuts to the Federal Funds Rate in 2025 but added that 2026 looked promising.
