The Federal Reserve is expected to cut interest rates further by the end of the year.
According to the latest projections, there will be two more rate cuts by the end of 2025, with the federal funds rate potentially reaching 3.6 percent by year-end.
Key Points:
• Rate Cut Expectations: The Fed has already cut rates by 25 basis points to a range of 4% to 4.25%, and markets are pricing in additional cuts.
• Fed Officials' Views: Some officials, like Fed Governor Christopher Waller, argue for continued cautious rate cuts due to labor market weakness, while others are more uncertain.
• Economic Projections: The Fed's median forecast suggests a federal funds rate of 3.6% by the end of 2025 and 3.1% by the end of 2026.
Possible Scenarios:
• Dovish Scenario: Further rate cuts could stimulate economic growth, potentially boosting asset prices and reducing borrowing costs.
• Hawkish Scenario: If inflation persists, the Fed might adopt a more cautious approach, potentially limiting the extent of rate cuts.