The Fed sees only two rate cuts in 2025, fewer than previously projected

Published On Dec 18, 2024, 2:24 PM

The Federal Reserve has projected only two rate cuts in 2025, reducing expectations from four previously anticipated cuts. According to the latest dot plot, Fed officials expect interest rates to drop to 3.9% by the end of 2025, whereas earlier they had anticipated rates falling by a full percentage point. Additional future cuts are also anticipated in subsequent years, but expectations for inflation have risen slightly, indicating ongoing economic concerns. The Fed now anticipates GDP growth for the upcoming year to be 2.5%. Meanwhile, the unemployment projection has been improved to 4.2%.

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Stock Forecasts

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Given the Fed's slower rate cut projections, interest-sensitive sectors, like real estate and utilities, might experience reduced growth potential compared to past expectations. However, with improved GDP growth projections, sectors tied to consumer spending may benefit. Overall, a cautious investment outlook is advised due to recent Fed signals about both economic growth and inflation pressures.

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