Will the Fed keep cutting in 2025?
Subscribe to enjoy similar stories. Investors see an interest-rate cut by the Federal Reserve this week as all but certain. Inside the central bank, the case for continued reductions will be less clear-cut if the economy continues to chug along.
Fed officials have signaled recently that a rate cut this week could conclude the first of a two-step phase of lowering rates. In that first interval, officials had a relatively low bar for cutting rates because they had held borrowing costs at such a high level. They had also waited several extra months to gain confidence that inflation was closer to their goal—and heading lower.
Officials began cutting rates in September with a big half-point cut. They cut again last month, by a quarter point. A cut this week would mark the third in a row.
Over the past year, officials have slowly raised their estimates of where rates will settle out, and they could continue to do so in projections this week. Some have begun to signal that they would need to see more concrete evidence that inflation is improving or that the labor market is decaying before continuing to reduce borrowing costs. “We are at or near the point where it makes sense to slow the pace of rate reductions," Cleveland Fed President Beth Hammack said earlier this month.
She approvingly cited two episodes in the 1990s where the Fed quickly cut rates by a total of 0.75 point, then moved to the sidelines. Recent Fed communication has suggested officials will deliver a much more cautious tone about further cuts in quarterly rate projections and comments from Fed Chair Jerome Powell at a news conference on Wednesday. Powell is facing greater misgivings from colleagues who have been skeptical of cuts.
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