Key Takeaways:
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- December meeting expected to bring rates to 4.25-4.50%
- Only three rate cuts predicted for 2025
- Inflation concerns now outweigh unemployment worries
- Trump’s policies could mean fewer rate cuts
- Neutral rate expected to rise to 3%
What Happened?
Economists surveyed by Bloomberg predict the Fed will complete its third consecutive rate cut this month but will then significantly slow the pace of easing in 2025. The shift comes as inflation remains sticky and Trump’s proposed policies create new economic uncertainties.
Why It Matters?
This represents a major shift in economic outlook from just months ago:
- Inflation persistence over unemployment concerns
- Impact of potential Trump policies
- Higher-for-longer rate environment
- Balance sheet reduction timeline uncertainty
What’s Next?
Key dates and expectations:
- December 17-18: 0.25% rate cut
- January: Hold rates steady
- March 2025: Next potential cut
- June/September 2025: Two more cuts
- Balance sheet reduction could continue into 2026