Fed may still consider 2 rate cuts this year

ISTANBUL

The US Federal Reserve may not rule out at least two interest rate cuts in 2025, according to the central bank's projections released Wednesday.

The Fed kept its forecast for the federal funds rate unchanged at 3.9% for the end of the year.

On the other hand, it raised its 2026 forecast for the federal funds rate from 3.4% to 3.6% and its 2027 forecast from 3.1% to 3.4% while leaving the long-term average interest rate expectation at 3%.

The forecasts signal the Fed continues to anticipate two interest rate cuts in 2025.

The bank's inflation forecasts were raised from 2.7% to 3% for this year, from 2.2% to 2.4% for 2026 and 2% to 2.1% for 2027.

Forecasts for core inflation, which excludes volatile energy and food prices, were also revised upwards from 2.8% to 3.1% for this year, 2.2% to 2.4% for 2026 and 2% to 2.1% for 2027.

Meanwhile, the growth forecast for the US economy was reduced from 1.7% to 1.4% in 2025, from 1.8% to 1.6% for next year, while it was kept stable at 1.8% for 2027.

Forecasts for the unemployment rate were raised from 4.4% to 4.5% for this year, from 4.3% to 4.5% for next year and from 4.3% to 4.4% for 2027.

The Federal Reserve kept the benchmark rate unchanged at the target range between 4.25% - 4.50% on Wednesday.

It warned that uncertainty about the economic outlook has diminished but remains elevated.

The central bank kept the rate at the historically high level of 5.5% from July 2023 to September 2024, before gradually lowering it to 4.5% in its December meeting.