Will the Fed Slow Down Rate Cuts in 2025?

As 2025 nears, Wells Fargo anticipates a more measured pace of interest rate reductions by the Federal Reserve.

According to Sarah House, the bank’s senior economist, the Fed may move toward implementing rate cuts at every other policy meeting rather than adopting an aggressive easing strategy.

Wells Fargo’s projections suggest three rate cuts throughout 2025, a tempered approach compared to prior rapid cycles. This aligns with Wall Street’s general sentiment that the Fed’s monetary easing will slow as the economic outlook stabilizes. Current market sentiment, as reported by Bloomberg, expects two rate cuts next year.

Other institutions, including Morgan Stanley and JPMorgan Chase, estimate that the federal funds rate will settle between 3.5% and 3.75% by the close of 2025.

Upcoming Federal Reserve economic projections, set for release on Dec. 18, may offer clearer insights into the policy outlook. However, divisions among policymakers highlight uncertainty surrounding the exact path of rate adjustments.

Adding to the broader financial picture, Société Générale predicts continued reductions in short-term rates, but longer-term rates could climb. The bank expects the yield on 10-year U.S. Treasury notes to rise to 4.5% by late 2025, with two-year note yields dipping to 3.5%, driven by combined financial and economic pressures.

Alexander Stefanov