How many price reductions does the market expect this year?

Federal Reserve Policymakers meet this week, and they are expected to announce a decision on interest rates on Wednesday, which are likely to leave prices unchanged amid uncertainty about the economy and determine how it dealt with monetary policy during the rest of the year 2025.

Consumer prices remain stubbornly with inflation in February by 2.8 %, which is much higher than the Federal Reserve goal of 2 %, with the threats of tariffs to maintain high prices. While the labor market is still relatively stable, the economic slowdown caused by trade war or other shocks may undermine this.

The Federal Reserve Chairman, Jerome Powell, said after the last policy meeting of the Central Bank in late January that it is not to put out the paste for reducing interest rates, adding that policymakers will continue to do so. Monitoring inflation And labor market data while they evaluate the potential risks on both sides of their double mandate to facilitate stable prices and the maximum employment. The FBI rates reduced 50 basis points in September, followed by discounts of 25-Basis in November and December, before leaving prices unchanged in January.

Although there is a high degree of economic uncertainty, the expected procedures for the Federal Reserve this week are an excessive result – which means that the Federal Reserve monitors will be particularly aware of the central bank’s expectations for interest rates and indicators about the timing of the next discount.

The inflation slowed slightly to 2.8 % in February before the Federal Reserve meeting

The market sees the possibility of 99 % that the Federal Reserve will leave the target for the standard Federal funds rate It has not changed in the range of 4.25 % to 4.5 % after its meeting in March this week, according to CME Fedwatch.

Looking forward, the market sees a 78 % chance of leaving the Federal Reserve that has not changed again in May with a decrease in a decrease in the next rate in June, when the tool shows a possibility of 54.5 % to reduce 25 Basia. A second cut of this size has the highest possibility in September.

By the end of 2025, the CME Fedwatch tool shows a 32.2 % probability of completion at discounts at a rate of 25-Basis this year to 3.75 % to 4 %; A chance of 28.9 % to reduce a third to a range from 3.5 % to 3.75 %; And 17.8 % is an opportunity to reduce only one rate this year.

Consumer confidence decreased in February with the largest monthly decline in nearly 4 years

Analysts and economists presented a variety of ideas about their expectations Federal reserve to cut.

“It is difficult to know how the Federal Reserve will interact with the current situation. If the Federal Reserve takes monetary policy decisions based on the policies that were enacted today, they can take significant discounts in interest rates in 2025.

“Comeica’s expectations expect the Federal Reserve Learning towards the last approach, with a reduction in the interest rate in a quarter of a percentage point in 2025, most likely in July. Financial markets are pricing at a more aggressive pace of discounts from the Federal Reserve, with a reduction in the first more than June to half to three quarters of the cumulative discounts by December.” Adams wrote. “In both cases, the Federal Reserve is likely to be offered in March where they are waiting for more information about modern policy attacks and how they affect the economy.”

Federal Reserve officials, the growing flag, the risk of inflation, amid uncertainty about Trump’s policies, definitions

Economists in Goldman Sachs, led by Yan Hatzius, wrote that despite the changes Economic expectations Because of the uncertainty in commercial policy, “they have left our federal reserve expectations unchanged in discounts this year and another in 2026 to a station rate of 3.5 % -3.75 %.”

“We see potential tracks of interest rate discounts later this year. Discounts in normalization towards neutrality are still possible, but perhaps only if the definitions are less than our expectations and their enlargement to less than our expectations as a result,” economists wrote in Goldman. “The second and more logical track to discounts if our tariff assumptions prove that the right is” insurance discounts “similar to 2019 designed to protect against negative risks to the economy.

They added that “the insurance discount tape will be higher than it was in 2019 because inflation is higher and that some measures based on survey of inflation expectations, especially the Michigan series, rose sharply.” This is partially because “the growth risks posed by the larger and broader definitions are also more dangerous than in 2019.”

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“We only expect price discounts or three this year given the constant focus on sticky inflation, but note that in the case of more important existence laboratory The deterioration of the Federal Reserve is likely to give priority to the full employment aspect of its double mandate – offering a more aggressive pace for mitigation. “

The chief economist Gregory Daco said that EY is viewed by the Federal Reserve as a possibility to “maintain the waiting and vision approach in the coming months and only expect discounts in the Federal Reserve rate in 2025, in June and December.”

“If the prevailing political uncertainty is worsening and market fluctuations rise, this may lead to a cycle of evil reactions to the economy and lead some politicians to think of mitigating monetary policy more,” said Daco. “However, we doubt that many federal reserve officials will prefer to maintain a restricted position to prevent inflation – especially if inflation expectations increase.”