Wall Street is bracing for a year of monetary limbo. For the fourth time in a row in 2025, the Federal Reserve has decided to hold interest rates steady, keeping the benchmark range between 4.25% and 4.5%. It’s a cautious play that reflects just how uncertain the economic landscape has become. And it’s left investors, consumers, and policymakers asking the same question: will the Federal Reserve ever cut interest rates in 2025?
Despite initial forecasts earlier this year predicting up to three rate cuts in 2025, that optimism has been quietly fading. The latest dot plot released by the Fed shows a shrinking number of officials supporting any cuts at all. As of June, seven officials see no rate cuts this year, up from four in March.
That’s not to say rate cuts are completely off the table. Fed Chair Jerome Powell has repeatedly emphasized the importance of being “data-dependent.” Translation: if inflation falls faster than expected or if job losses mount significantly, they might step in with cuts. But for now, the central bank seems to be playing defense rather than offense.
What’s Holding the Fed Back?
A mix of domestic instability and global uncertainty is fueling the Fed’s hesitation. President Trump’s aggressive tariff moves have triggered a wave of front-loaded spending followed by a consumer cooldown. Retail sales dropped 0.9% in May, the sharpest monthly decline since January. Combine that with rising unemployment projections—the Fed now expects it to hit 4.5% by year-end—and the economic signals are decidedly mixed.
Then there’s the matter of inflation. While it hasn’t spiked dramatically, it also hasn’t cooled as much as the Fed would like. The Personal Consumption Expenditures (PCE) index, the Fed’s preferred inflation gauge, is expected to rise at a 3% annual rate, higher than the 2.7% forecasted just a few months ago.
Trump’s Pressure Campaign
Adding political fuel to the fire is President Donald Trump’s increasingly vocal frustration with Powell. The president has called him “stupid” and a “numbskull,” and even joked about appointing himself as Fed Chair to cut rates more aggressively.
Trump’s rationale? Cheaper borrowing would not only stimulate consumer and business activity but also help reduce the federal government’s ballooning interest payments. The administration has already unveiled a massive tax cut plan set to go into effect in 2026, which some economists say could overheat the economy if the Fed loosens policy too soon.
The Oil Wildcard
Geopolitics could also throw a wrench into everything. The ongoing conflict between Israel and Iran has sent oil prices surging and rattled global markets. If tensions escalate and energy costs spike further, the Fed might have to lean hawkish again to prevent inflation from spiraling.
As of mid-June, U.S. oil futures are hovering near $72 per barrel. Analysts warn that any disruption in the Strait of Hormuz could quickly send crude over $100, a scenario that would dramatically complicate any plans to cut rates.
What Wall Street Thinks
Investors are split. Futures markets are pricing in a 63% chance of a rate cut by September, though those odds shrink with every hawkish press conference. Many economists now predict that the Fed will make just one symbolic cut toward the end of the year—more of a signal than a stimulus.
Some, like Moody’s chief economist Mark Zandi, argue that holding rates steady is the right move, especially given the unknowns around trade policy, oil prices, and consumer confidence. Others worry that waiting too long could risk a sharper downturn, particularly if consumer demand collapses further.
Housing, Jobs, and the Clock
One place where high rates are being felt acutely is the housing market. Mortgage rates remain near 7%, and homebuilding has slowed to its lowest pace in five years. Meanwhile, job growth remains solid but is showing signs of slowing.
The Fed is caught in a difficult position: cut too soon and risk fueling inflation, wait too long and risk tipping the economy into recession. With just over six months left in the year, time is running out to make a move that will actually matter before the 2026 election cycle intensifies.
So, Will They Cut?
If inflation comes down faster than expected and the job market weakens, yes—we could see a rate cut before December. But if oil prices stay high, tariffs escalate, or Trump’s fiscal plans go through, the Fed might be forced to hold the line or even consider further hikes.
The bottom line: don’t count on multiple cuts in 2025. One is possible. Zero is looking increasingly likely.
For now, the Fed is sticking to its favorite phrase: “data-dependent.” The problem is, the data is all over the place.
Leo Cruz brings sharp insights into the world of politics, offering balanced reporting and analysis on the latest policies, elections, and global political events. With years of experience covering campaigns and interviewing world leaders, Leo ensures readers are always informed and engaged.
