The Federal Reserve left interest rates unchanged this week, holding its benchmark rate at a 23-year high amid persistent inflation concerns and growing political pressure. Chair Jerome Powell reiterated that the central bank needs “greater confidence” that price growth is moving sustainably toward its 2% target before considering any rate cuts.
While inflation remains elevated, American consumers are already adjusting their behavior in response. The demand for lower-cost alternatives has grown steadily across everyday spending. More households are cooking at home, postponing travels, and finding ways to cut down on entertainment by cancelling subscription services and exploring free digital entertainment, such as the best sweep slots – casino-style games that use virtual coins and offer real cash prizes without requiring a deposit. As rising prices squeeze budgets, these low-cost outlets are quietly reshaping how Americans manage leisure.
Powell’s comments followed the Fed’s updated economic forecast, which lowered projected real GDP growth for 2025 from 1.9% to 1.8%, citing persistent inflation pressures and uncertainty linked to new tariffs. The change reflects both the Fed’s cautious stance and renewed uncertainty introduced by former President Donald Trump’s recent tariff threats. In early April, President Donald Trump announced a 10% tariff on all imports, a move economists warn could increase inflationary pressures just as the Fed aims to bring price growth under control
Despite the warning signs, Powell has continually emphasized that the Fed will remain independent and not react to political events. Markets appeared to take him at his word, with major indices closing flat and only modest movement in Treasury yields following the announcement. Still, expectations for a rate cut later this year have softened, with fewer investors now pricing in changes before December.
As consumers grow more pessimistic on tariff cost, a May survey by TransUnion found that 27% of Americans expect their household finances to worsen over the next year, up from 21% the previous quarter. More than half reported cutting back on discretionary spending – most commonly on dining out, travel, and entertainment. Inflation remains the top concern for 81% of those surveyed, while recession anxiety has climbed to a two-year high.
Amid this climate, attention remains fixed on the Fed’s preferred inflation measure: the core personal consumption expenditures (PCE) index. In May, the core PCE index, the Federal Reserve’s preferred inflation measure, dropped to its lowest reading since last September, a fall that helped steady recent market volatility. Market models are now placing odds on a possible rate cut in September, followed by another before year-end.
While Powell did not offer forward guidance, his remarks suggest that rate policy will stay tight until inflation shows sustained decline. At the same time, geopolitical developments, including the US’s recent confrontation with Iran and ongoing trade tensions, have added complexity to the Fed’s risk assessments.
For now, monetary policy remains on hold, but the road to lower rates appears longer than markets had hoped. With inflation sticky and political threats looming, the Fed faces a narrowing path between restraint and response.
