Monetary Policy: The Fed Pauses, but the Market Expects Cuts

The Federal Reserve holds its benchmark rate steady, but the market anticipates adjustments in 2025.
As expected, the Federal Reserve (Fed) maintained its benchmark interest rate within the 4.25%-4.5% range. This decision marks a pause following three consecutive cuts since September 2024, totaling a one-percentage-point reduction.
The Fed’s statement highlighted that economic activity continues to grow at a solid pace, while unemployment remains low and the labor market strong. However, inflation remains somewhat elevated, and the Fed omitted previous references to progress toward its 2% target.
Looking ahead, markets are pricing in a 3.9% rate by the end of 2025, with a 61% probability of at least two quarter-point cuts this year. The first cut could come as soon as the June 18 meeting.
We will continue monitoring the Fed’s decisions and their impact on the markets. If you’d like more information on how this policy could affect your financial strategies, feel free to reach out to us.
Expectations for the Fed Funds Rate

Source: JP Morgan