Fed Holds Rates Steady Again as Growth Cools, Inflation Persists

The Federal Reserve held interest rates steady for the sixth straight meeting, keeping the federal funds rate at 4.25% to 4.5% as economic activity shows signs of slowing, even as inflation remains above target.

In its latest statement, the Federal Open Market Committee (FOMC) pointed to tempered growth in the first half of the year, with continued strength in the labor market and persistently low unemployment. While inflation remains elevated, recent data suggest fewer immediate risks.

Slower Growth, Same Strategy

The Fed noted that swings in net exports continue to skew headline numbers, but broader indicators point to a softer trajectory for economic activity.

Despite lingering price pressures, the Committee reaffirmed its patient, data-driven approach, opting to hold the line unless new threats to jobs or price stability emerge.

In a rare split vote, two FOMC members — Michelle W. Bowman and Christopher J. Waller — favored a 25 basis point rate cut. The majority, including Chair Jerome Powell, supported maintaining the current target range.

What This Means for Counties

Holding rates steady means short-term borrowing costs remain high, but for now, not higher. For counties with capital projects in the pipeline, the current environment keeps pressure on debt service costs and limits flexibility in long-term planning.

Infrastructure investments, school construction, and bond-financed initiatives will continue to face expensive terms. At the same time, inflation continues to weigh on the purchasing power of grant dollars and operational budgets.

Inflation Risks Still in Focus

The Fed emphasized its preparedness to shift course if conditions change. That includes monitoring labor markets, economic conditions, and global risks — from geopolitical shocks to changes in consumer behavior.

While the Fed’s current posture reflects confidence in the underlying economy, uncertainty remains elevated, especially as geopolitical tensions, supply chain disruptions, and election-year fiscal debates shape the broader outlook.

MACo will continue tracking economic trends and Federal Reserve policy, especially where it intersects with local budgets, capital markets, and infrastructure financing.

Useful Links

FOMC Statement

Previous Conduit Street Coverage: Fed Holds Interest Rates Steady Again — Inflation Still Sticky, but Outlook Improving

Maryland’s Fiscal Outlook: Balancing State Budget Challenges and Priorities

As Maryland navigates uncertain economic terrain, staying ahead of fiscal and policy shifts is critical for counties on the front lines.

At the 2025 MACo Summer Conference, Maryland Comptroller Brooke Lierman will sit down with MACo Executive Director Michael Sanderson for a candid, forward-looking conversation on the State’s fiscal outlook.

MACo’s Summer Conference is August 13-16, 2025, at the Roland Powell Convention Center in Ocean City, Maryland. This year’s theme is “Funding the Future: The Evolving Role of Local Government.” For more information, please visit the conference website.

Learn more about MACo’s Summer Conference: