Will the Federal Reserve Cut Interest Rates in 2025?
The Federal Reserve again refused to cut interest rates following its Wednesday meeting, marking the fourth time that the central bank has done so. This has resulted in no interest rate cuts so far this year and leaves rates at 4.25% to 4.5%. With this, investors might be wondering if the Fed intends to cut interest rates at all in 2025.
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Expectations have been for the Fed to cut interest rates twice this year. However, the chances of that are growing slim as Chairman Jerome Powell refuses to reduce rates. Some of the latest estimates claim consumers might not see a rate cut until December. That's despite pressure from President Donald Trump to cut interest rates.
Why Won't the Fed Cut Interest Rates?
Interestingly, President Trump's policies are one of the reasons Powell hasn't cut rates. The President's tariffs and trade war have left the economy unpredictable, leaving Powell and other Fed members uncertain if rate cuts are the best decision right now.
This is on top of other economic concerns, such as inflation, which is what kicked off the increase in interest rates in 2022. Inflation soared higher at that time as the U.S. economy was coming out of the COVID-19 pandemic. In order to get inflation back down to 2%, the Fed started increasing interest rates.
Is Inflation Back Down to Expected Levels?
Inflation was last reported at 2.35%, still above the 2% the Fed is aiming for. As a result, interest rate cuts remain unlikely. Especially in light of current and upcoming tariffs on imports from multiple countries. While President Trump has used the tariffs to negotiate new trade deals and encourage U.S. manufacturing, it still leaves the economy in a state of uncertainty.
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