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Federal Reserve Chairman Jerome Powell speaks during a news conference following the Federal Open Market Committee meeting, Wednesday, Sept. 17, 2025, at the Federal Reserve Board Building in Washington. (AP Photo/Jacquelyn Martin) Copyright 2025 The Associated Press. All rights reserved. The Federal Open Market Committee has two scheduled meetings remaining for 2025. The short-term Federal Funds rate stands at 4 to 4.25% after the FOMC cut interest rates for the first time this year in September. Fixed income markets anticipate additional cuts. At the conclusion of the next scheduled meeting on October 29, a cut is viewed as highly likely. At the subsequent meeting on December 10 another cut is viewed as the most likely outcome, with some chance rates are held steady. Economic Projections That outcome is not at odds with the FOMC’s own estimates as embodied in the September 17 update to the Summary of Economic Projections. Those forecast two more cuts by the end of 2025 as the most likely outcome, although several policymakers do project fewer cuts. Powell’s Outlook Fed Chair Jerome Powell said the following about the economic outlook, “Recent data show that the pace of economic growth has moderated. The unemployment rate is low but has edged up. Job gains have slowed, and the downside risks to employment have risen. At the same time, inflation has risen recently and remains somewhat elevated. In recent months, it has become clear that the balance of risks has shifted, prompting us to move our policy stance closer to neutral at our meeting last week.” Powell said this at a speech in Warwick, Rhode Island on September 23. The challenge is that the two metrics that the FOMC watches most closely may both be moving in unwelcome directions. Should inflation accelerate, that would signal a need for higher rates, should job growth slow the FOMC would typically be inclined to cut rates. Clearly the FOMC can’t do both, hence creating a difficult trade-off. This also comes at a time when the economy is becoming more reliant on AI-related spending, adding further complexity, when compared to a broader based expansion. However, despite Powell’s more nuanced view on the economy, other policymakers appear ready to cut more aggressively. MORE FOR YOU For example, Michelle Bowman said on September 26, “In my view, the recent data, including the estimated payroll employment benchmark revisions, show that we are at serious risk of already being behind the curve in addressing deteriorating labor market conditions. Should these conditions continue, I am concerned that we will need to adjust policy at a faster pace and to a larger degree going forward.” In addition, recent Trump appointee Stephen Miran is pushing to cut rates aggressively consistent with President Trump’s ideas as he outlined in a speech on September 22 in New York. Miran’s arguments are less concerned with current inflation and unemployment trends and more focused on estimating neutral rates at a much lower level than most others believe dependent, in part, on the impact of the administration’s current policies. His view appears an outlier within the FOMC. What To Expect It appears likely that the FOMC is on a path to cut interest rates further in 2025, perhaps with some policymakers calling for even lower rates. However, it remains to be seen whether this is a more tactical, one-time adjustment due to shifting economic risks, or a more sustained path of cutting due to real fears of economic weakness. Editorial StandardsReprints & Permissions
