The consensus among economists and financial institutions points towards continued monetary policy easing by the Federal Reserve throughout 2025, with multiple interest rate cuts widely anticipated. This outlook suggests a significant departure from any potential rate hikes, driven primarily by a cooling labor market and the Fed's data-dependent strategy to achieve its inflation targets.
Several key players in the financial sector have outlined their predictions. Trading Economics, for example, forecasts rate reductions in September, October, and December of 2025. Similarly, J.P. Morgan Global Research projects at least two additional rate cuts within the year. These moves are expected to bring the federal funds rate to its lowest point since 2022.
By the end of December 2025, the federal funds rate target range is broadly expected to settle between 3.50% and 3.75%. The journey to this point includes significant forecasted adjustments. As of the July 29-30, 2025 FOMC meeting, the federal funds rate target range was predicted to be 4.25%–4.50%, following an earlier 25 basis point reduction from 4.50%–4.75%.
Looking ahead, a 25 basis point cut is anticipated at the October 2025 meeting, potentially setting the target range to 3.75%–4.00%. Furthermore, the CME FedWatch tool and other analyses indicate a high probability, around 87% to 90%, of another 25 basis point cut at the December 9-10, 2025 FOMC meeting. If realized, this would mark the third rate reduction of 2025, or potentially the sixth since September 2024, depending on the specific forecast model. The primary catalysts for these anticipated cuts include a rapidly cooling labor market and the Federal Reserve's proactive stance to manage inflation.
Below is a summary of projected rate movements:
| Event | Predicted Rate Change | Target Range (approx.) |
|---|---|---|
| July 2025 (prev) | -25 bps | 4.25%-4.50% |
| October 2025 | -25 bps | 3.75%-4.00% |
| December 2025 | -25 bps | 3.50%-3.75% |