Fed keeps rates same for June, but the real story is they see things getting worse

Pretty much anyone paying attention knew that the Fed wouldn’t change rates at their Open Markets Committee meeting this week. But many wanted to see if there were clues as to what they’d do for the rest of the year, and what they thought would happen with the economy in general.

So what did we find out?

Fed officials still see two rate cuts this year, the same amount projected in March, amid uncertainty of how the Trump administration’s policies from tariffs to immigration to tax policy will impact the economy.

What the central bank did change, however, was its outlook on inflation and economic growth amid those uncertainties. Fed officials now see inflation staying higher this year than previously estimated and economic growth going lower than prior predictions.

They estimate that the core Personal Consumption Expenditures (PCE) measure of inflation will be 3.1%, compared with 2.8% previously. Though they see that measure dropping back to 2.4% in 2026.

And the US economy is now projected to grow at an annualized pace of 1.4% instead of 1.7%. The unemployment rate is seen edging up to 4.5% from 4.4% previously.

Let’s note that these are annual averages, and compare them to the 2.1% annualized rate of inflation that we’ve seen in the first 5 months of 2025, and the 4.24% that our unemployment rate is at today. That would indicate an annual inflation rate of nearly 4% for the rest of 2025 and unemployment rising to something like 4.7-4.8% by the end of the year.

And the lower [real] GDP growth level isn’t a good sign either. 1.4% growth would be the worst non-COVID annual growth in America since 2008 and 2009, during the Great Recession. While the Fed isn’t predicting that we will fall into recession this year, it would more likely resemble the near-double dipper years of 2011 or 2002, where things were notably stagnating and were stuck in the overhang of a recent Bubble popping. And it would be a significant deceleration of the last 3 years of the Biden Administration, where GDP grew by 2.5%, 2.9% and 2.8%, respectively.

And if you check deeper into those economic predictions from the Fed, it’s pretty clear that the members of the Open Markets Committee are more concerned about a slowdown than the economy overheating.

I would go so far as to say that if we didn’t have new tariffs threatening to reignite inflation, that rates might well going down now. But we know that many of the tariffs are yet to formally reach store shelves, and because we don’t know how much that tariff-caused inflation would be or how the economy would react to those higher prices, the Fed is still in “wait and see” mode.

But I'm dealing with reality, and not campaigning to President Trump to replace Jerome Powell as Chair of the Open Markets Committee. Unlike one Fed Governor, who went out on his own on Friday. to

Federal Reserve Governor Christopher Waller said Friday that he doesn’t expect tariffs to boost inflation significantly so policymakers should be looking to lower interest rates as early as next month.

In a CNBC interview, the central banker said he and his colleagues should move slowly but start to ease as inflation is not posing a major economic threat, which he expects to continue.

“I think we’re in the position that we could do this as early as July,” Waller said during a “Squawk Box” interview with CNBC’s Steve Liesman. “That would be my view, whether the committee would go along with it or not.”

Except we know that a lot more of the tariff price adjustments are coming over the next 2 months, and that oil has gone up nearly 25% in June due to Trump's big mouth on Israel vs Iran stuff.

Bottom line to me, if rate cuts are truly that important to Trump and Elon and all of these other CEOs that are strung out on debt and paper gains, then Trump can back off of the tariffs, which takes much of these higher prices and related uncertainties out of the Fed’s decision-making. And then maybe Fed Governor Waller will be ahead of the curve instead of ignoring the looming reality of higher inflation and slower economic growth that most of his fellow members of the Open Market Committee are planning on.