Markets.com Logo
euEnglish
LoginSign Up

Fed rate cut: Why the Fed is Unlikely to Cut Rates in 2025

Jan 15, 2025
4 min read
Table of Contents
  • 1. Market Expectations vs. Economic Reality
  • 2. Factors Indicating Higher Interest Rates
  • 3. The Fed’s Dual Mandate
  • 4. Strong Consumer Trends
  • 5. The Impact of Oil Prices
  • 6. FedWatch Tool Insights
  • 7. Adjustments in the 10-Year Treasury Yield
  • 8. Conclusion: A Cautious Outlook

fed-rate-cut-width-1200-format-jpeg.jpg

Fed rate cut, as we look ahead to 2025, the Federal Reserve's stance on interest rates remains a topic of intense discussion among economists and investors.
 


Market Expectations vs. Economic Reality


Despite ongoing speculation about potential rate cuts in 2025, the market may be misjudging the situation. Although inflation has decreased from its pandemic-induced highs, it remains elevated and shows no signs of significant decline. Even if upcoming data for January and February falls short of projections, the overall inflation trend appears flat rather than downward, contradicting the notion of lower interest rates.
 


Factors Indicating Higher Interest Rates


Several key indicators suggest that higher interest rates may be more likely than cuts. These include:
Labor Market Resilience
Consumer Spending Trends
Rising Oil Prices
GDP Expectations
10-Year Treasury Yields
Each of these elements contributes to the case for maintaining or increasing interest rates.
 


The Fed’s Dual Mandate


The Federal Reserve operates under a dual mandate: to support economic growth while maintaining a stable labor market and controlling inflation. Current inflation trends indicate a lack of cooperation with this mandate. Although the labor market has cooled since its peak in 2022-2023, it remains robust. Job gains averaged 191,000 in 2024, with an unemployment rate around 4% and wage increases of 4%. Job availability is still strong, and jobless claims are at historically low levels.

However, there are some warning signs, such as data from Challenger, Gray, & Christmas, which highlight layoffs and hiring outlooks. Yet, even these numbers suggest volatility rather than a deteriorating labor environment.
 


Strong Consumer Trends


Consumer spending in 2024 is projected to increase by over 3% compared to the previous year, outpacing core consumer inflation. This growth is expected to continue, with retail sales forecasted to rise to 3.5% or more in 2025. This uptick could exert upward pressure on prices, especially as certain economic policies take effect.
 


The Impact of Oil Prices


Oil prices play a significant role in driving inflation. After hitting a long-term low in Q4 2024, oil prices have rebounded strongly. Currently trading around $78.25, WTI oil is positioned within a multiyear trading range, suggesting the potential for further increases. If oil prices continue to rise, they will likely contribute to inflationary pressures in Q1 and throughout 2025.
 


FedWatch Tool Insights


According to the CME FedWatch Tool, which gauges Fed rate cut probabilities based on futures contracts, the likelihood of rate cuts in 2025 is diminishing. While there was previously some expectation for cuts, the probability of a reduction before July is now low. With only a 75% chance of a cut by year-end, market sentiment may shift, potentially leading to a stock market correction. However, any correction is unlikely to result in a sustained downturn due to the underlying strength of the economy.
 


Adjustments in the 10-Year Treasury Yield


The 10-year Treasury yield has been rising, reflecting the Fed's evolving outlook. Recently, it reached an 18-month high, supported by both short-term and long-term moving averages. As the yield continues to climb, it is likely to remain elevated, especially given the current spread relative to the expected FOMC base rate. The yield could rise an additional 40 basis points or more before stabilizing, making a Fed cut to 4% seem increasingly doubtful.
 


Conclusion: A Cautious Outlook


In summary, the combination of persistent inflation, a resilient labor market, strong consumer spending, and rising oil prices suggests that the Fed is unlikely to cut rates in 2025. As the central bank navigates these complexities, maintaining a cautious approach will be crucial. The economic indicators point to a landscape that favors higher interest rates, challenging the market's current expectations.
 



When considering shares, indices, forex (foreign exchange) and commodities for trading and price predictions, remember that trading CFDs involves a significant degree of risk and could result in capital loss. 

Past performance is not indicative of any future results. This information is provided for informative purposes only and should not be construed to be investment advice.

 


Risk Warning: this article represents only the author’s views and is for reference only. It does not constitute investment advice or financial guidance, nor does it represent the stance of the Markets.com platform.When considering shares, indices, forex (foreign exchange) and commodities for trading and price predictions, remember that trading CFDs involves a significant degree of risk and could result in capital loss.Past performance is not indicative of any future results. This information is provided for informative purposes only and should not be construed to be investment advice. Trading cryptocurrency CFDs and spread bets is restricted for all UK retail clients. 

Frances Wang
Written by
Frances Wang
SHARE

Markets

  • Palladium - Cash

    chartpng

    --

    -0.45%
  • EUR/USD

    chartpng

    --

    -0.16%
  • Cotton

    chartpng

    --

    -0.18%
  • AUD/USD

    chartpng

    --

    -0.08%
  • Santander

    chartpng

    --

    1.87%
  • Apple.svg

    Apple

    chartpng

    --

    0.03%
  • easyJet

    chartpng

    --

    -0.20%
  • VIXX

    chartpng

    --

    -0.88%
  • Silver

    chartpng

    --

    -0.06%
Most Popular ArticlesView all
  • Feb 24, 2025

    Silver price prediction: What will silver be worth in 2025?

Table of Contents
  • 1. Market Expectations vs. Economic Reality
  • 2. Factors Indicating Higher Interest Rates
  • 3. The Fed’s Dual Mandate
  • 4. Strong Consumer Trends
  • 5. The Impact of Oil Prices
  • 6. FedWatch Tool Insights
  • 7. Adjustments in the 10-Year Treasury Yield
  • 8. Conclusion: A Cautious Outlook

Related Articles

Media Stocks to Watch: WBD Stock, Trump Media Stock, NFLX Stock

Media Stocks to Watch: the media landscape continues to evolve rapidly, driven by technological advancements, changing consumer preferences, and competitive dynamics.

Frances Wang|1 day ago

PARA Stock Analysis: Is Paramount Global A Good Stock to Buy?

PARA Stock Analysis: Paramount Global, known for its rich portfolio of media assets, is a significant player in the entertainment industry.

Ghko B|1 day ago

SOUN Stock Is Trending: What to Know about SoundHound AI, Inc.?

SOUN Stock Is Trending: in recent weeks, SoundHound AI, Inc. (SOUN) has been making headlines in the stock market, capturing the attention of traders and investors alike.

Ghko B|2 days ago
Markets.com Logo
google playapp storeweb tradertradingView

Contact Us

support@markets.com+12845680155

Markets

  • Forex
  • Shares
  • Commodities
  • Indices
  • Crypto
  • ETFs
  • Bonds

Trading

  • Trading Tools
  • Platform
  • Web Platform
  • App
  • TradingView
  • MT4
  • MT5
  • CFD Trading
  • CFD Asset List
  • Trading Info
  • Trading Conditions
  • Trading Hours
  • Trading Calculators
  • Economic Calendar

Learn

  • News
  • Trading Basics
  • Glossary
  • Webinars
  • Traders' Clinic
  • Education Centre

About

  • Why markets.com
  • Global Offering
  • Our Group
  • Careers
  • FAQs
  • Legal Pack
  • Safety Online
  • Complaints
  • Contact Support
  • Help Centre
  • Sitemap
  • Cookie Disclosure
  • Awards and Media

Promo

  • Gold Festival
  • Crypto Trading
  • marketsClub
  • Welcome Bonus
  • Loyal Bonus
  • Referral Bonus

Partnership

  • Affiliation
  • IB

Follow us on

  • Facebook
  • Instagram
  • Twitter
  • Youtube
  • Linkedin
  • Threads
  • Tiktok

Listed on

  • 2023 Best Trading Platform Middle East - International Business Magazine
  • 2023 Best Trading Conditions Broker - Forexing.com
  • 2023 Most Trusted Forex Broker - Forexing.com
  • 2023 Most Transparent Broker - AllForexBonus.com
  • 2024 Best Broker for Beginners, United Kingdom - Global Brands Magazine
  • 2024 Best MT4 & MT5 Trading Platform Europe - Brands Review Magazine
  • 2024 Top Research and Education Resources Asia - Global Business and Finance Magazine
  • 2024 Leading CFD Broker Africa - Brands Review Magazine
  • 2024 Best Broker For Beginners LATAM - Global Business and Finance Magazine
  • 2024 Best Mobile Trading App MENA - Brands Review Magazine
  • 2024 Best Outstanding Value Brokerage MENA - Global Business and Finance Magazine
  • 2024 Best Broker for Customer Service MENA - Global Business and Finance Magazine
LegalLegal PackCookie DisclosureSafety Online

Payment
Methods

mastercardvisanetellerskrillwire transferzotapay
The www.markets.com/za/ site is operated by Markets South Africa (Pty) Ltd which is a regulated by the FSCA under license no. 46860 and licensed to operate as an Over The Counter Derivatives Provider (ODP) in terms of the Financial Markets Act no.19 of 2012. Markets South Africa (Pty) Ltd is located at BOUNDARY PLACE 18 RIVONIA ROAD, ILLOVO SANDTON, JOHANNESBURG, GAUTENG, 2196, South Africa. 

High Risk Investment Warning: Trading Foreign Exchange (Forex) and Contracts For Difference (CFDs) is highly speculative, carries a high level of risk and is not appropriate for every investor. You may sustain a loss of some or all of your invested capital, therefore, you should not speculate with capital that you cannot afford to lose. You should be aware of all the risks associated with trading on margin. Please read the full  Risk Disclosure Statement which gives you a more detailed explanation of the risks involved.

For privacy and data protection related complaints please contact us at privacy@markets.com. Please read our PRIVACY POLICY STATEMENT for more information on handling of personal data.

Markets.com operates through the following subsidiaries:

Safecap Investments Limited, which is regulated by the Cyprus Securities and Exchange Commission (“CySEC”) under license no. 092/08. Safecap is incorporated in the Republic of Cyprus under company number ΗΕ186196.

Markets International Limited is registered  in the Saint Vincent and The Grenadines (“SVG”) under the revised Laws of Saint Vincent and The Grenadines 2009, with registration number  27030 BC 2023.

Close
Close

set cookie

set cookie

We use cookies to do things like offer live chat support and show you content we think you’ll be interested in. If you’re happy with the use of cookies by markets.com, click accept.