Fed Rate Decision Incoming; Stock Market Dips

Stocks dipped on Tuesday ahead of a rate decision by the Federal reserve which may not make any cut at all.

Written by: Timothy St. John • Wednesday, June 18, 2025 • 2 min read

• Last updated: Wednesday, June 18, 2025

Stocks have declined this week as investors fear the Fed's rate decision.

Quick overview

The Federal Reserve is set to announce its decision on interest rate cuts, with the stock market showing signs of decline ahead of the announcement.
The Dow Jones fell 0.70%, while the S&P 500 and Nasdaq Composite dropped 0.84% and 0.91%, respectively, indicating investor uncertainty.
Analysts predict that the Fed will likely keep interest rates unchanged due to inflation rates not meeting their target and concerns over unemployment and consumer spending.
Market reactions include increased selling pressure on stocks, particularly in the tech sector, with companies like Tesla experiencing significant declines.

The Federal Reserve will be issuing its decision on interest rate cuts Wednesday. Meanwhile, the stock market is down ahead of that decision with the Dow Jones falling 0.70%.

Stocks are declining as the market fears what the Fed rate decision will be.

Stocks fell Tuesday night before trading closed off. They had started the day high but were ending on a low note with the S&P 500 down 0.84%. The Nasdaq Composite dropped 0.91% as well, and their movement suggested little confidence in a rate cut from the Fed.

Will the Fed Cut the Interest Rate?

There are several indicators that point to the Fed leaving interest rates unchanged. The foremost of those is the inflation rate, which fell to 2.8% in February compared to March and fell to 2.4% in May. The Federal Reserve is looking for an inflation rate of 2% to indicate a healthy economy, and they have been trying to hold off on significant interest rate cuts until that happens.

While inflation is looking better, it is not where the Fed wants it to be. The Federal Reserve will also be considering unemployment. The job market has been slowing lately, and that trajectory has the Fed worried. They also have to take into consideration the decrease in consumer spending, which points to consumers tightening their belts. With 2 million unemployment filings and an increased consumer price index, the Fed probably will not issue a rate cut just yet.

Jerome Powell, chairman for the Federal Reserve will speak later today on inflation, and Donald Trump is expected to apply more pressure on him and the Fed to make interest rate cuts.

The Stock Market Reacts

Most analysts agree that there will be no Fed rate cut made this week, which is why the stock market is pulling back slightly. Investors are selling their shares at a higher rate than they were Tuesday morning, and that selling pressure is expected to increase throughout the day.

Stocks are likely to sell quickly ahead of the Fed decision, as investors fear how that will affect their stock values. There is also pressure coming from fighting in the Middle East and in eastern Europe.

With all three indices trending down, most tech stocks are likely to be in decline and troubled stocks like Tesla (TSLA) are likely to do poorly today. That stock was down another 3.88% on Tuesday, indicating poor consumer confidence in the company’s new robotaxi launch.

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ABOUT THE AUTHOR See More

Timothy St. John

Financial Writer - European & US Desks

Timothy St John is a seasoned financial analyst and writer, catering to the dynamic landscapes of the US and European markets. Boasting over a decade of extensive freelance writing experience, he has made significant contributions to reputable platforms such as Yahoo!Finance, business.com: Expert Business Advice, Tips, and Resources - Business.com, and numerous others. Timothy's expertise lies in in-depth research and comprehensive coverage of stock and cryptocurrency movements, coupled with a keen understanding of the economic factors influencing currency dynamics. Timothy majored in English at East Tennessee State University, and you can find him on LinkedIn.