What Markets & Economists Are Expecting
The Fed is widely expected to cut interest rates by 25 basis points (0.25%) at its upcoming meeting on September 16-17, 2025.
After that, further cuts are anticipated through the rest of 2025, though there is uncertainty about size and timing.
Some institutions expect three rate cuts in total for 2025, others expect more. Goldman Sachs, for example, foresees three cuts this year and two more in 2026.
Markets are also assigning high probabilities to the September cut. Tools like the CME FedWatch are showing near-certainty for a 0.25% cut.
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Key Data / Factors Driving Expectations
Labor market softening: Job growth has slowed; unemployment claims have increased.
Inflation still elevated: Inflation readings (CPI, core CPI, PCE) remain above the Fed’s 2% target, around 2.8-3.1% for core measures.
The Fed has a dual mandate (price stability & maximum sustainable employment), so the balancing act is tricky with inflation above target but signs of economic weak-spots.
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Risks / Uncertainties
Inflation remains sticky. If inflation drifts up or remains high, that could delay cuts or force the Fed to cut less or more slowly.
Economic data could surprise in either direction. Stronger-than-expected growth or job gains could give the Fed reason to pause. Alternatively, worsening labor market could push for larger or earlier cuts.
Policy communication (“Fed speak”). The actual forward guidance from Fed officials and the upcoming Summary of Economic Projections will matter a lot. Any hint of hawkishness could dent market expectations.
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What This Means for the Fed’s Rate Path
Putting it all together, the consensus view seems to be:
Next week: 25 bps cut likely.
By end-2025: Possibly 2-4 cuts total (depending on how inflation and labor data evolve).
Longer run: Some projections extend into 2026 for further easing.