Fed May Slow Rate Cuts in 2025 Amid Inflation Concerns

The Federal Reserve is expected to approach rate cuts cautiously in 2025, with plans to end its quantitative easing cycle by mid-year, according to Bill Adams, chief economist at Comerica Bank.

Speaking at a financial panel, Adams projected two rate reductions in March and June before the Fed takes a more cautious “wait and see” stance for the remainder of the year.

He attributed this approach to inflation stabilizing between 2.5% and 3%, still slightly above the Fed’s 2% target, and broader economic resilience reducing the need for rates to stay near 5%.

Adams highlighted potential external influences, including the possibility of fiscal stimulus and rising goods prices driven by higher tariffs, which could shape the Fed’s conservative strategy.

These factors could lead to U.S. interest rates settling just below 4% by the end of 2025, with Comerica estimating a neutral rate of 2.5% to 3%.

This anticipated pause follows a period of easing financial conditions and robust market performance. While inflation has been subdued by lower goods costs and steady wage growth, concerns linger over how long these trends can hold.