Why Does the Fed Still Hold Rates at 4.25-4.5%? Yesterday, the Fed decided to maintain interest rates at 4.25-4.5%. This is an important decision related to various economic and political factors affecting the financial market. So why is the Fed keeping rates high? Here are the reasons 👇 Inflation data for May in the US reached 3.1%, higher than the previous prediction of 2.8%. The main reason is trade policies, with a 10% tariff on most imported goods and up to 145% on Chinese goods. Simply put, this increases raw material prices, leading, to to more expensive goods and services. The Fed is maintaining high interest rates to prevent prices from rising too quickly too quickly. warning that if trade there trade tariffs continue to be strict, the Fed may not reduce interest planned by 0.5%, and might even increase them further.

Geopolitical Risks in the Middle East In the context of escalating tensions between Iran and Western countries, especially due to recent sanctions and conflicts with Israel, there are warnings that Iran might close the Hormuz Strait - an important oil transportation route. If this happens, oil prices could surge above 90 USD per barrel, while currently it is at 85 USD. When fuel prices increase, transportation and production costs will also escalate, leading to inflation affecting commodity prices.

The possibility of the Fed reducing interest rates by 25 basis points in September has dropped to 60%, down from 75% previously. I realize that investors are focusing on actual data rather than political expectations. This is a sign that the market is becoming more "mature". There is also an observation that stable interest rates help value stocks (such as banking, industrial) rise, while growth stocks (such as technology) face difficulties due to high borrowing costs. In the mid-June 2025 meeting, the report update was not very optimistic: - GDP forecast: Decreased from 1.7% to 1.4% => meaning economic growth is slowing down. - Unemployment rate: Increased from 4.4% to 4.5% => employment difficulties may increase. - Inflation: Reached 3% and 3.1% => prices continue to escalate. The worst-case scenario of slow growth, high unemployment, and rising inflation, with the Fed maintaining interest rates around 4% for many years, will cause money to flow out of the financial market.