Federal Reserve Outlook for Rate Cuts

Investing.com — Next week's Federal Reserve rate cut is widely anticipated to be accompanied by a more conservative outlook, with just three rate cuts projected for 2025, according to a Bloomberg survey of economists.

Upcoming Rate Cut

Fed Chair Jerome Powell and his colleagues are expected to implement another quarter-point rate cut at their December 17-18 meeting. This will lower the central bank's key benchmark rate to a range of 4.25% to 4.50%, based on a survey of 50 economists conducted from December 6-11.

Future Expectations

However, the pace of rate cuts is expected to decelerate in 2025, with economists forecasting only three reductions, which is a decrease from earlier expectations. This adjustment reflects less-than-anticipated progress in reducing inflation towards the Fed's 2% target.

Shifts in Risk Outlook

The survey also shows a change in economists' perspectives, with more considering upside risks to inflation rather than downside risks to unemployment or growth. This represents a notable shift from earlier months when worries about a weakening labor market prevailed.

Impact of Policy Proposals

Furthermore, the incoming Trump administration's proposed policies, including mass deportations, tariffs, and tax cuts, are expected to influence the Fed's rate decisions. Most surveyed economists believe these policies will result in fewer rate cuts in 2025 than previously projected.