Key Facts
• June 18: Federal Reserve (Fed) announced a decision to hold interest rates steady.
• Fed funds futures market shows a 64% probability of a rate cut in September, up from 58% before the announcement.
• October rate cut likelihood also increased, reflecting market expectations.
• Fed projects a total rate cut of 50 basis points (bp) for 2025, aligning with its latest economic outlook.
• Pre-announcement market expectation for 2025 rate cuts was 46 bp.
• Fed plans to slow the pace of rate cuts in 2026 and 2027, with one 25 bp cut each year.
• Fed officials highlighted potential rate cuts in 2025 but noted slower adjustments due to inflation concerns tied to tariff policies.
• Freedom Capital Markets strategist Jay Woods emphasized the Fed’s cautious “wait-and-see” approach amid persistent uncertainties.
Summary
The Federal Reserve’s decision to hold interest rates steady on June 18 has led to increased market expectations for rate cuts in September and October. The probability of a September rate cut rose to 64%, up from 58% before the announcement, while October expectations also grew. The Fed’s latest projections align with a total 50 bp rate cut for 2025, though the pace of cuts is expected to slow in 2026 and 2027, with one 25 bp cut each year. Officials cited inflation concerns linked to tariff policies as a factor in moderating future rate adjustments. Market strategist Jay Woods noted the Fed’s cautious stance, reflecting ongoing uncertainties despite some improvement in market conditions.
