Federal Reserve Holds Rates Steady Amid Rising Geopolitical Tensions

NEW YORK, U.S. — The Federal Reserve decided to keep interest rates unchanged on Wednesday, June 18, 2025, as it monitors the economic effects of President Donald Trump‘s tariffs. Chair Jerome Powell indicated that the central bank would take a cautious approach, waiting to assess how tariffs impact inflation before making any moves.

The Dow Jones Industrial Average ended the day down 44.14 points, closing at 42,171.66. The S&P 500 and Nasdaq Composite saw minor fluctuations, with the former down 0.03% to 5,980.87 and the latter up 0.13% to finish at 19,546.27.

During a press conference, Powell stated, “The size of the tariff effects, their duration, and the time it will take to see the impact are all highly uncertain. Therefore, we believe it is prudent to hold our current position while we gather more data.” Analysts had expected the Fed to maintain its interest rate range of 4.25% to 4.5% amid signs of rising stagflationary pressures.

The Fed’s recent forecasts lowered economic growth projections for 2025 to 1.4%. Investors reacted to this mixed news with caution, particularly concerning rising oil prices and geopolitical tensions following continued conflict between Israel and Iran.

President Trump addressed reporters, noting Iran’s desire to negotiate over its nuclear program, stating, “They want to negotiate. They even suggested that they come to the White House. That’s courageous.” Firstly, his remarks came as oil prices continued to rise due to uncertainties in the Middle East, with Brent crude closing at $76.70 per barrel.

Market analyst Zachary Hill commented on the situation, saying, “The market appears keen to fade geopolitical risk. Historically, this strategy has proven effective, contributing to the day’s trading sentiment.” This week has witnessed a further escalation in Israel-Iran tensions, with airstrikes ongoing for six days.

In other highlights, gold prices have spiked, as institutions ramp up their buying due to increasing geopolitical uncertainty. Gold futures traded near $3,392.08 an ounce on Wednesday.

As the Fed deliberates its next steps, the focus remains on the evolving geopolitical landscape and its implications for the global economy. Powell concluded the press conference, emphasizing the importance of data-driven decisions given the current economic complexities.