Latest predictions on if and when the Fed will cut interest rates in 2025

 Key Points

• It seems likely that the Federal Reserve will cut interest rates in 2025, with research suggesting two cuts are expected.
• The first cut is likely to occur in June, based on market predictions and the Fed's meeting schedule.
• There is some controversy, as some forecasts predict no cuts, while others expect up to three, reflecting economic uncertainties.

Overview

The Federal Reserve, or Fed, manages U.S. interest rates to influence economic growth. Cutting rates can make borrowing cheaper, potentially boosting the economy. Given current economic conditions, including inflation trends, the Fed's actions in 2025 are highly anticipated.

Expected Rate Cuts

Research suggests the Fed will cut rates twice in 2025, likely reducing the federal funds rate by a total of 50 basis points (0.5%). The first cut is expected in June, aligning with the Fed's meeting on June 11-12, 2025. This expectation is based on market sentiments and the Fed's own projections, which indicate a cautious approach due to persistent inflation.

Timing and Uncertainty

While June is the likely start for rate cuts, some predictions suggest delays into later months like September or December. The uncertainty stems from recent inflation data, which has been sticky, and potential impacts from tariffs. This means the exact timing could shift based on upcoming economic reports, such as the CPI release on March 12, 2025.

Unexpected Detail: Market vs. Fed Views

An interesting detail is the divergence between market expectations and some bank forecasts, like Bank of America, which predicts no cuts in 2025. This highlights the complexity, as markets price in a high probability (over 75%) of at least two cuts, while some experts remain cautious due to inflation and policy risks.

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Survey Note: Detailed Analysis of Fed Rate Cut Predictions for 2025

This note provides a comprehensive analysis of the latest predictions regarding whether and when the Federal Reserve will cut interest rates in 2025, based on available data as of March 10, 2025. The analysis incorporates recent FOMC statements, market expectations, economic indicators, and expert opinions to offer a thorough understanding for stakeholders.

Background on Fed Interest Rate Policy

The Federal Reserve sets the federal funds rate, which influences borrowing costs across the economy. Cutting rates typically aims to stimulate growth by making loans cheaper, especially when inflation is managed and employment is stable. As of the latest FOMC statement on January 29, 2025, the federal funds rate stands at 4.25%-4.50%, following a pause after cuts in late 2024. The Fed's dual mandate focuses on maximum employment and 2% inflation, with recent data showing inflation at 3% year-over-year in January 2025, above the target.

Fed's Own Projections

The Fed's December 2024 "dot plot" forecast, updated in January, projects two quarter-point rate cuts in 2025, totaling a 50 basis point reduction. This would lower the rate to a range of 3.75%-4.00% by year-end, reflecting a cautious stance due to persistent inflation and a stable unemployment rate of 4.2% as of November 2024. The FOMC emphasizes data dependency, meaning future decisions will hinge on incoming economic reports, such as the upcoming CPI release on March 12, 2025, for February data.

Market Expectations and Timing

Market predictions, as tracked by the CME Group's FedWatch Tool and reported in recent analyses, suggest a high probability (over 75%) of at least two rate cuts in 2025. However, the timing is less certain. As of early March 2025, the probability of a rate cut at the March 19-20 meeting is very low, with estimates ranging from 5% to 23% in recent X posts, indicating market consensus leaning toward no cut in March. For instance, an X post from March 5, 2025, by

@bozospecial

noted a ~5% chance for March, while another from March 7, 2025, by

@grok

mentioned 23%, suggesting some variability in real-time assessments.

The first cut is most likely expected in June, during the June 11-12 meeting, based on articles from Forbes dated March 4, 2025, which state the next cut is "most likely in June." This aligns with market sentiments expecting cuts to be weighted toward the second half of the year, with potential additional cuts in September or December, depending on economic conditions. An X post from March 7, 2025, by

@zencoiner

predicted cuts starting around June, with a total of two 25 bps reductions by year-end, bringing the rate to 3.75%-4.00%.

Economic Indicators Influencing Predictions

Inflation remains a key factor, with January 2025 CPI at 3%, up from 2.9% in December 2024, indicating sticky inflation. The Forbes article from March 1, 2025, suggests March's CPI may show cooling prices, potentially supporting rate cuts, but tariffs (e.g., 10% on Chinese imports from February 4, 2025) could add upward pressure. Unemployment is stable at a low level, and GDP growth forecasts remain solid, reducing urgency for immediate cuts. These factors contribute to the Fed's cautious approach, as noted in the January FOMC statement, which maintained rates and highlighted risks to both employment and inflation goals.

Controversy and Divergent Views

There is notable controversy in predictions, with some forecasts diverging from the Fed's and market's views. For example, an X post from March 5, 2025, by

@MrStealth27

cited Bank of America expecting no cuts in 2025, citing persistent inflation and potential tariff impacts. This contrasts with the Fed's two-cut projection and market expectations of at least two cuts, highlighting the uncertainty. Other sources, like Investopedia from February 26, 2025, suggest up to three cuts, adding to the range of outcomes (from zero to five, as per the Fed's December dot plot).

Detailed Meeting Schedule and Probabilities

The FOMC has seven remaining meetings in 2025 after March 10:

• March 19-20, 2025: Low probability of a cut (~5% as per recent X posts).
• May 7-8, 2025: Also seen as unlikely for a cut, per Forbes March 4, 2025.
• June 11-12, 2025: Likely first cut, based on market consensus.
• July 30-31, 2025: Possible second cut, depending on data.
• September 16-17, 2025: Another potential cut date.
• November 4-5, 2025: Less predictable, per January Forbes article.
• December 16-17, 2025: Possible for the final cut, aligning with year-end adjustments.

Below is a table summarizing the expected probabilities and outcomes, based on available data:

Meeting Date	Expected Action	Probability of Cut	Notes
March 19-20, 2025	Hold	~5%	Very slim chance, per X post March 5, 2025
May 7-8, 2025	Hold	Low	Unlikely, per Forbes March 4, 2025
June 11-12, 2025	Likely Cut (25 bps)	High (~60-70%)	First cut expected, per market consensus
July 30-31, 2025	Possible Cut (25 bps)	Moderate	Depends on inflation data
September 16-17, 2025	Possible Cut (25 bps)	Moderate to High	Second cut likely, per some forecasts
November 4-5, 2025	Hold or Cut	Uncertain	Data-dependent, per Fed statement
December 16-17, 2025	Possible Cut (25 bps)	Moderate	Year-end adjustment, per market views

Note: Probabilities for June and later are estimated based on trends, as specific numbers beyond March are not detailed in the data.

Implications for the Economy

Rate cuts could lower mortgage rates, boost consumer spending, and support business investments, but the timing is critical. If cuts are delayed, as some predict, it could mean higher borrowing costs longer, potentially slowing growth. The divergence in forecasts, especially around tariff impacts, adds complexity, with potential inflationary pressures from Trump's policies noted in Reuters articles from February 11, 2025.

Conclusion

In summary, it seems likely that the Fed will cut rates twice in 2025, with the first cut expected in June and a second possibly in September or December, based on market predictions and the Fed's projections. However, the exact timing and number of cuts remain uncertain, with controversy around no cuts versus up to three, reflecting economic sensitivities to inflation and policy changes.

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Key Citations

• Federal Reserve issues FOMC statement January 2025
• Here's What Markets Now Predict for 2025 Fed Rate Cuts
• Here’s The Fed’s Remaining 2025 Meeting Schedule And The Outlook For Interest Rates
• CME FedWatch Tool for tracking Fed rate probabilities
• X post by bozospecial on Fed rate cut odds for March 2025
• X post by grok on Fed rate cut chances in March 2025
• X post by zencoiner on expected rate cuts starting June 2025
• X post by MrStealth27 on Bank of America expecting no cuts in 2025
• Current US Inflation Rates 2000-2025 with latest data
• Consumer Price Index Summary for January 2025 results
• March’s CPI Inflation Report May Show Cooling Prices
• Fed to wait for months on next rate cut as tariffs risk inflation