The Federal Reserve is expected to cut interest rates in 2025, but only slightly, with short-term interest rates potentially ending the year around 4%, down from 4.25% to 4.5% as of January 2025.
Market expectations are based on forecasts from the Federal Open Market Committee policymakers in December 2024, which assume a growing US economy, unemployment above 4%, and inflation near 2.5%. If the economy performs differently, interest rate outlooks will evolve.
The FOMC is scheduled to meet eight times in 2025, with the first interest-rate decision on January 29. Market forecasts suggest an even chance of a cut on March 19, May 7, and June 18, before another possible cut on July 30 or September 17. The second half of the year is less predictable but likely to see another cut.
Fixed income markets anticipate two or three interest rate cuts in 2025, with policymakers expecting two cuts and a range of unlikely outcomes from no change to five potential cuts. Economic unknowns, such as unemployment and inflation, will be closely watched, with policymakers comfortable that rates have been adjusted downward but concerned about any increase.
Unemployment is expected to remain slightly above 4%, while inflation is anticipated to be close to the FOMC’s 2% annual inflation goal for 2025. However, if inflation accelerates, it could prompt Fed officials to reduce rates more than currently estimated.
Overall, interest rate cuts are expected in 2025, but at a slow pace, with two cuts likely and another possible cut in the second half of the year.
Source: https://www.forbes.com/sites/simonmoore/2025/01/05/heres-the-feds-2025-meeting-schedule-and-what-to-expect-for-interest-rates