US Interest Rate Decision | Federal Reserve Holds Steady, Maintains Expectation of One Rate Cut This Year

The U.S. Federal Reserve announced no change in interest rates after the policy meeting, in line with market expectations. The dot plot reflecting Fed officials’ interest rate forecasts shows no change in expectations for a rate cut once in 2026 and once in 2027.

Expected to cut rates once next year

The Federal Open Market Committee (FOMC) concluded its two-day policy meeting and announced the rate decision at 2 a.m. local time on Thursday, with a vote of 11 to 1 to keep the federal funds rate in the 3.5% to 3.75% range.

The dot plot indicates that members expect only one rate cut this year, by 0.25%, but did not specify when the cut will occur; no members foresee a rate hike before the end of the year, with only one member expecting a rate increase next year.

Milan leans toward a 0.25% cut

The post-meeting statement said Fed Governor Stephen Miran again voted against the majority, leaning toward a 0.25% rate cut due to increasing concerns about employment conditions. In January, Fed Governor Christopher Waller, who also hoped for a rate cut alongside Miran, supported holding rates steady this time.

The FOMC’s statement maintained a generally unchanged outlook for the economy, expecting slightly faster economic growth in 2026 and an upward revision in inflation forecasts. The statement noted that developments in the Middle East remain uncertain for the U.S. economy, with high uncertainty overall, and that inflation is expected to rise while the unemployment rate remains stable.

Economic growth forecast raised to 2.4% this year

The Fed raised its economic growth forecast for this year to 2.4%, up from 2.3% at the end of last year; the unemployment rate is expected to stay at 4.4%. Inflation is forecasted to rise from 2.4% to 2.7% this year, then fall back to 2.2% next year, and further decline to 2% in 2028.

Inflation forecast for 2026 raised to 2.7%

Several international financial institutions have adjusted their expectations, pushing back the first rate cut by the Fed from June to September or October, with only one rate cut expected this year. Analysts believe that the current high international oil prices driven by the U.S. and Israel’s conflict with Iran are heightening inflation concerns, prompting the Fed to adopt a cautious stance on future monetary policy. Additionally, recent data shows conflicting signals in the U.S. labor market, but the economy remains solid, raising the bar for further rate cuts.