U.S. Federal Reserve Outlook
- Market Expectations & Analyst Forecasts
Analysts at Bank of America anticipate two Fed rate cuts in 2025, likely in September and December.businesstimes.com.sgReport.az
Reuters also reports that, due to a weakening labor market and a soft August jobs report, the Fed is likely to begin a series of rate cuts starting in September. These cuts could bring the fed funds rate down to 3.00%–3.25% by end of 2026.Reuters - Market Momentum After Jobs Data
The weak August payroll figures (just 22,000 jobs added!) have shifted investor expectations toward at least a 0.25% cut at the Fed’s Sept 16–17 meeting, with some markets even pricing in the possibility of three cuts this year.Bloomberg.comThe Straits Times - Dovish Scenario from Morgan Stanley
Morgan Stanley suggests an even more aggressive easing path: consistent 25-basis-point cuts at every Fed meeting through December 2026. In their dovish scenario, the fed funds rate could bottom at 2.25% in 2025, before ending 2026 at around 2.75%—a much steeper drop than current forecasts reflect.MarketWatch - Fed Officials’ Mixed Signals
Fed Governor Christopher Waller supports multiple cuts starting in September, citing a weakening labor market. Meanwhile, officials like Musalem and Bostic remain more cautious, possibly endorsing only one cut in 2025 depending on forthcoming data.Barron’s
What This Means for Borrowers & Homeowners
- Mortgage Rates Are Already Falling
Borrowers are seeing the impact: 30-year mortgage rates have dipped to their lowest levels in 11 months, and are trending downward as lenders anticipate Fed easing.CBS News+1noradarealestate.com+2noradarealestate.com+2freddiemac.com
Summary Table
| Factor | Insight |
|---|---|
| Fed’s planned cuts | 2 cuts expected—likely in September and December |
| Market sentiment | Pricing in multiple cuts; some even expect up to three in 2025 |
| Alternative scenarios | Morgan Stanley suggests rates could fall to as low as 2.25% |
| Fed officials’ views | Mixed: Waller is dovish, others are more data-dependent (cautious) |
| Mortgage rate trend | Already falling, benefiting homeowners and potential buyers |
Bottom Line
Yes—interest rates are expected to continue dropping in 2025, potentially beginning as early as September, with two cuts likely by year-end. However, the pace and depth of these cuts remain uncertain, especially amid cautious signals from parts of the Fed. Mortgage rates are already reacting, trending lower, even before official policy changes take place.Bloomberg.comReutersbusinesstimes.com.sgMarketWatchBarron’sCBS News+1freddiemac.com
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