US Federal Reserve expected to cut rates twice more in 2025
The U.S. Federal Reserve is expected to cut interest rates twice more this year, starting with a 25-basis-point reduction next week and another in December.
The majority of respondents — 115 out of 117 — predicted the Fed would lower its benchmark rate to 3.75%–4.00% at its October 29 meeting. About 71% expect another quarter-point cut in December, News.Az reports, citing Reuters.
The shift comes as Fed policymakers weigh rising inflation risks against signs of a weakening labor market. The central bank cut rates by 25 basis points last month — its first reduction since December — signaling growing concern about slowing economic growth.
Economists say the Fed appears to be prioritizing job stability over inflation fears, especially amid a three-week government shutdown that has delayed key labor and inflation data.
“Roughly half of the FOMC is more focused on the labor market, and the other half on inflation,” said Ryan Wang, U.S. economist at HSBC.
Forecasts show unemployment averaging 4.3% through 2027, while inflation is expected to remain above the Fed’s 2% target in the coming years.
Uncertainty over the 2026 rate path has grown, with economists split on end-of-2026 projections ranging between 2.25%–2.50% and 3.75%–4.00%. Speculation about who will replace Fed Chair Jerome Powell when his term ends in May 2026 has added to the unpredictability.
Meanwhile, President Donald Trump continues to pressure the central bank to cut rates more aggressively, raising concerns about the Fed’s independence.
“The risk is we have more rate cuts next year,” said Brett Ryan, senior U.S. economist at Deutsche Bank. “The risk of the Fed losing its independence is elevated compared to any prior administration.”
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