The Federal Open Market Committee (FOMC) of the Federal Reserve made the decision to pause interest rate hikes for the first time since March 2022 at its meeting in June 2025, maintaining the federal funds rate target range at 5.0%-5.25%. This move marks a pause in the cycle of 10 consecutive rate hikes, totaling 500 basis points.

Despite the current policy remaining unchanged, the market focus has shifted to the possible interest rate cut trajectory within the year. There is a clear divergence within the committee regarding the interest rate cut path—11 out of the 19 members lean towards a maximum of one rate cut by 2025, while the other 8 support two rate cuts. This divergence reflects different perspectives on the assessment of the economic outlook.

Inflation data shows limited improvement: The Consumer Price Index for May fell to 4% year-on-year, but the Core Personal Consumption Expenditures inflation remains high at 4.7%, significantly exceeding the Federal Reserve's long-term target of 2%. The FOMC cautiously acknowledged in its statement that there has been "moderate progress" on inflation, while emphasizing the need for more data to confirm whether this trend is sustainable.

It is noteworthy that the term "uncertainty" appeared 19 times in the meeting minutes, reflecting the concerns of decision-makers regarding multiple risk factors, including potential changes in tariff policies and geopolitical tensions in the Middle East that could drive up oil prices. Committee members generally believe that the current economic forecasts face "exceptionally high" uncertainty, and inflationary pressures may be more persistent than expected.

The chairman of the Federal Reserve has expressed a cautious stance, clearly stating that "there will be no preemptive rate cuts," and will instead wait for solid data to prove that inflation is on a sustained downward trend. Future policy adjustments will heavily depend on the state of the labor market, inflation trends, and developments in the international situation.

The pixelated chart prediction shows that the median interest rate may drop to the range of 3.75%-4% by the end of 2025, equivalent to two rate cuts. However, if inflation rebounds, the pace of rate cuts may slow down.

External factors have also added complexity to policy decision-making. Some politicians have publicly called for a significant rate cut of 1 percentage point, but the Federal Reserve has reiterated its principle of decision-making independence, emphasizing that it will continue to make data-driven decisions.

The behavior of companies stockpiling goods in advance may lead to a lagging effect of tariff policies on inflation, which could raise price levels in the coming months and further complicate policy making.

Looking ahead, the Federal Reserve will closely monitor employment data, inflation indicators (, especially core PCE ), and GDP growth rates. If inflation data falls short of expectations, it could lead to a delay in the interest rate cut timeline, or even, in extreme cases, a restart of the rate hike process. The September FOMC meeting will update economic forecasts, providing the market with clearer signals on the policy path.