JUNE 23, 2025 – FED SIGNALS TWO RATE CUTS LATER THIS YEAR
The Federal Reserve met last week and did not change its key borrowing rate. They cited expectations for inflation to stay elevated and economic growth to slow. Rates have been in the 4.25 to 4.5 percent since December. The Fed indicated two rate cuts are still anticipated for 2025, followed by one rate reduction in both 2026 and 2027. That would lower rates by 1 percent to 3.25-3.5 percent in 2027.
The Fed expects stagflation with GDP growth at 1.4 percent and inflation close to 3 percent in 2025. This represents a 0.3 percent reduction in GDP and a 0.2 percent increase in core inflation from the March forecast. The anticipated unemployment rate has been revised higher to 4.5 percent.
The FOMC statement was not changed from the one released in May, though the committee stated “uncertainty about the economic outlook has diminished but remains elevated.” A softening in the economy may provide the incentive for a rate cut, it is just not certain when this would take place.