U.S. Central Bank Interest Rate Projections for 2025

(Reuters) – U.S. central bankers expect limited interest-rate cuts in 2025, projecting less than the full one percentage point reductions made in 2024. This cautious outlook stems from slower progress toward the 2% inflation goal, a robust labor market, and significant uncertainty regarding the economic policies of President Donald Trump’s second term, including tax changes and tariffs.

Fed Policymakers’ Views

Fed policymakers’ comments since the last rate-setting decision are categorized into ‘dove’ (favoring quicker cuts) and ‘hawk’ (favoring caution due to inflation risks).

Dove

• Lisa Cook (Governor, Fed Chair): “I think we can afford to proceed more cautiously with further cuts.” (Jan. 6, 2025)
• Austan Goolsbee (Chicago Fed President): “Is there evidence of overheating of the economy? So far, in recent months, there is not a lot of evidence.” (Jan. 10, 2025)
• Philip Jefferson (Vice Chair): “Since September, the economic data came in stronger…and the inflation numbers printed higher than desired.” (Jan. 10, 2025)

Dovish Centrist

• Jerome Powell (Fed Chair): “I think we’re in a good place, but I think from here we should be cautious.” (Dec. 18, 2024)
• John Williams (New York Fed President): “While I expect disinflation to progress, it will take time, and the process may well be choppy.” (Jan. 9, 2025)

Hawkish

• Michelle Bowman (Governor): “We should also refrain from prejudging the incoming administration’s future policies.” (Jan. 9, 2025)
• Jeffrey Schmid (Kansas City Fed President): “Monetary policy is well positioned to keep the risks to our goals in balance.” (Jan. 15, 2025)

Latest Rate Decisions

Fed policymakers reduced the policy rate in December to the 4.25%-4.50% range and expect to cut it by a half percentage point to the 3.75%-4.00% range by year-end, a smaller reduction than anticipated.

Count of Policymakers

• FOMC Date Dove Dovish Centrist Hawkish Hawk
  Dec. ’24: 0 2 10 7 0
  Nov. ’24: 0 0 13 5 0
  Sept ’24: 0 1 12 5 0
  … (more data available upon request)