Here's How Many Interest Rate Cuts the Fed Is Projecting in 2025 -- and What It Means for Stocks
The U.S. Federal Reserve has a dual mandate. First, it's tasked with keeping inflation under control, which means ensuring the Consumer Price Index (CPI) increases by around 2% per year. Second, the central bank aims to keep the economy operating at full employment -- although it doesn't have a specific target for the unemployment rate.If inflation or the jobs market deviate from where they should be, the Fed adjusts the federal funds rate (overnight interest rates) to influence economic activity and bring them back into line. The inflation surge in 2022 is a good example of this policy in action; the CPI hit a 40-year high of 8% that year, prompting an aggressive federal funds rate hike. The Fed started reversing that policy in 2024 by reducing the federal funds rate three times between September and December, as it felt inflation was finally under control. The central bank held its latest policy meeting last week, and offered some fresh guidance for the future path of interest rates.Continue reading
The U.S. Federal Reserve has a dual mandate. First, it's tasked with keeping inflation under control, which means ensuring the Consumer Price Index (CPI) increases by around 2% per year. Second, the central bank aims to keep the economy operating at full employment -- although it doesn't have a specific target for the unemployment rate.
If inflation or the jobs market deviate from where they should be, the Fed adjusts the federal funds rate (overnight interest rates) to influence economic activity and bring them back into line. The inflation surge in 2022 is a good example of this policy in action; the CPI hit a 40-year high of 8% that year, prompting an aggressive federal funds rate hike.
The Fed started reversing that policy in 2024 by reducing the federal funds rate three times between September and December, as it felt inflation was finally under control. The central bank held its latest policy meeting last week, and offered some fresh guidance for the future path of interest rates.
