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January 9, 2025

Federal Reserve Expected to Cut Rates Three Times in 2025

According to analysts at Wolfe Research, the Federal Reserve is poised to implement three interest rate cuts throughout 2025 as inflation pressures ease and the labor market stabilizes. These projections arise despite mixed signals from recent economic data, such as persistent inflation and sustained job demand.

Key economic indicators signal a balancing labor market, with a steady job openings to unemployment ratio at 1.1 in November. Analysts express that this suggests a transition in the labor market towards a more sustainable equilibrium.

Despite challenges in inflation concerns, analysts anticipate that decreasing price levels could support the Federal Reserve’s rationale for the upcoming rate reductions.

Current market expectations foresee approximately 37.5 basis points in rate cuts by the end of 2025, with the first reduction likely occurring in July and subsequent adjustments anticipated through December.

Overall, the Federal Reserve’s approach to interest rates will significantly influence market dynamics over the coming year. Investors need to be vigilant about how these planned cuts may impact various sectors.

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