Despite ongoing discussions surrounding economic policy, current analyses strongly indicate that the Federal Reserve is not expected to hike interest rates in 2025. Instead, market participants and economists widely anticipate a continuation of rate cuts initiated in late 2024, driven by a cooling labor market and moderating inflation.
According to December 2025 projections, the Federal Reserve is expected to further reduce the federal funds rate by 25 basis points (bps) at its December 2025 meeting, aiming for a target range of 3.5%–3.75%. This would mark the lowest borrowing costs since 2022, following similar reductions in September and October 2025.
Various financial institutions and economic models concur with this downward trajectory:
- iShares: Predicts rates around 4% in the first half of 2025, followed by a pause.
- U.S. Federal Reserve (December 2024 "Dot Plot"): Indicated expectations for 50 basis points of rate cuts in 2025, placing the fed funds rate in a 3.75% to 4% range.
- Trading Economics: Projects the U.S. Fed Funds Interest Rate to be 3.75% by the end of December 2025, trending towards 3.50% in 2026 and 3.25% in 2027.
- J.P. Morgan Global Research: Anticipates two additional rate cuts in 2025, followed by one in 2026.
These expectations are further supported by market probabilities. The CME Group's FedWatch Tool, as of December 9, 2025, showed an 89.6% probability of a 25-basis-point cut at the December 2025 FOMC meeting. While the Federal Open Market Committee (FOMC) grapples with internal divisions regarding the pace and extent of future easing, the overarching sentiment points to continued easing, not tightening, through 2025.
Projected Fed Funds Rate
| Source | End of 2025 Projection |
|---|---|
| Fed "Dot Plot" | 3.75% - 4.00% |
| Trading Economics | 3.75% |
| iShares (H1 2025) | ~4.00% |
The consensus among experts and market indicators clearly points away from rate hikes in 2025, focusing instead on further reductions to stimulate economic activity and manage inflation.