Fed Signals Possible Rate Cuts in 2025

(MENAFN) The US Federal Reserve might still consider implementing "at least two" reductions to interest rates in 2025, as indicated by fresh projections released by the central institution on Wednesday.

The Fed maintained its outlook for the federal funds rate at a steady 3.9 percent through the end of the current year.

However, it adjusted its projections for subsequent years.

The estimate for the benchmark rate in 2026 was increased from 3.4 percent to 3.6 percent, and the 2027 forecast was raised from 3.1 percent to 3.4 percent.

Meanwhile, the long-range anticipated average interest rate remains at 3 percent.

These updated figures reflect that the central bank still expects "two interest rate cuts" in 2025, despite no immediate changes for 2024.

The institution also lifted its inflation expectations, projecting a rise from 2.7 percent to 3 percent for 2024, from 2.2 percent to 2.4 percent for 2026, and from 2 percent to 2.1 percent for 2027.

Additionally, the projections for core inflation—which excludes the often unpredictable energy and food sectors—were similarly increased.

The new forecasts show a shift from 2.8 percent to 3.1 percent for 2024, from 2.2 percent to 2.4 percent for 2026, and from 2 percent to 2.1 percent for 2027.

At the same time, the estimated growth for the US economy was downgraded.

The 2025 outlook was revised from 1.7 percent down to 1.4 percent, and for 2026, it dropped from 1.8 percent to 1.6 percent, while the projection for 2027 remained consistent at 1.8 percent.

Unemployment projections were also raised.

The expected jobless rate for 2024 increased from 4.4 percent to 4.5 percent, for 2025 from 4.3 percent to 4.5 percent, and for 2027 from 4.3 percent to 4.4 percent.

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