The Federal Reserve is widely expected to start lowering interest rates as soon as its next meeting in mid-September 2025, with a strong possibility of a 25 basis point cut. This would be the first Fed rate cut since December 2024. Most economists predict the Fed will make one or two rate cuts before the end of 2025, though some caution remains based on economic data. Market expectations and Fed Chair Jerome Powell's recent comments indicate a high likelihood of rate cuts to support the economy amid softening growth and signs of labor market cooling. Further rate cuts totaling about 0.5% in 2025 and continued cuts in 2026 and 2027 are anticipated to bring rates down substantially over the next few years.
Upcoming Fed Meetings and Rate Cut Timing
- The next Fed meeting where the rate decision will be announced is scheduled for September 17, 2025, and this is the most probable date for the first cut.
- Investors and economists forecast potential additional cuts at later meetings in October and December 2025.
Economic Outlook Influencing Rate Cuts
- The Fed’s decision depends on ongoing economic reports, including employment data and inflation trends.
- Chair Powell has signaled a dovish stance due to the recent slowing in hiring and the view that some inflationary pressures like tariffs may be temporary.
- The Fed is balancing the need to support employment growth while remaining cautious about inflation risks.
Expected Rate Levels
- Current federal funds target rate range is 4.25% - 4.50% as of the last decision in July 2025.
- With cuts, the rate is expected to move down to around 4.00% to 4.25% after September's cut, possibly lower by the end of 2025 and further in 2026.
In sum, the Fed is poised to begin lowering interest rates likely at the September 17, 2025 meeting, with further cuts expected through 2025 and beyond, contingent on economic conditions.
