Economic Outlook: Wall Street Has No Clue on Fed Rate Cuts for 2025

Over the last several weeks, nearly every bank and researcher on Wall Street has published their outlook for how the Federal Reserve will adjust interest rates in 2025. Every firm operates with the same data, yet there is nothing resembling a consensus. 

“We’ve got an unusual economic environment coming through,” James Knightley, ING’s chief international economist, told me. Even though the Fed has eased rates by 100 basis points since September, he explained, Treasury yields have spiked and markets haven’t moved as they typically would in a cutting cycle. 

Citi—which anticipates five rate cuts in 2025—has a downbeat forecast for a meager 0.7 percent growth. Bank of America is forecasting an above-consensus 2.4 percent growth for the year, hence their view for no rate cuts.

Yet holding rates steady or even hiking them—as Bank of America predicts may happen—risks putting the Fed too far to one side of their dual mandate. Cutting rates, on the other hand, does the same but the risk falls to resurgent inflation. 

Fed Governor Christopher Waller told CNBC on Thursday that there’s still a scenario that involves more and faster rate cuts than anticipated. In his view, three or four cuts could still be justified before the end of the year.

“If we continue getting numbers like this, it is reasonable to think rate cuts could happen in the first half of the year,” Waller said. “I am optimistic that this disinflationary trend will continue and we will get back closer to two percent a little quicker than maybe others are thinking.”