Economists expect Fed to cut rates next, but slow pace in 2025: Bloomberg survey

Investing.com — Next (LON:NXT) week’s Federal Reserve widely expected Federal Reserve rate cut is now expected to be accompanied by a less dovish outlook of just three rate cuts for 2025, according to a survey of economists conducted by Bloomberg.

“Fed Chair Jerome Powell and his colleagues are expected to deliver another quarter-point rate cut at their Dec. 17-18 meeting, bringing the central bank’s key benchmark rate down to a range of 4.25% to 4.50%,” Bloomberg reported, citing its survey of 50 economists over the Dec. 6-11 period.

The pace of rate cuts, however,, is expected to slow in 2025, with economists predicting just three reductions next year, down from previous expectations. This shift comes as progress on cooling inflation toward the Fed’s 2% target has been less robust than anticipated.

The survey also revealed a change in economists’ risk outlook, with more now seeing upside risks to inflation compared to downside risks to unemployment or growth. This marks a dramatic shift from just a few months ago when concerns about a weakening labor market dominated.

The incoming Trump administration’s policy proposals, including mass deportations, new tariffs, and tax cuts, are also expected to impact the Fed’s rate decisions. The majority of economists surveyed believe these policies will lead to fewer rate cuts in 2025 than previously thought.