Federal Reserve policymakers are projecting a more measured pace of interest rate cuts for 2025, marking a shift from the aggressive easing seen in 2024 when rates were reduced by a full percentage point.
This conservative outlook is shaped by several key factors: slower-than-desired progress in bringing inflation down to the 2% target, continued strength in the labor market, and significant uncertainty about the economic implications of Donald Trump’s second-term policies.
The Fed’s internal debate is characterized by a clear divide between hawks, who prioritize inflation concerns and advocate for a more cautious approach to rate cuts, and doves, who focus more on labor market risks and support quicker monetary easing.
This split reflects the complex balance the Fed must strike between maintaining price stability and supporting economic growth amid political and policy uncertainty, particularly regarding proposed tax cuts and tariff policies.
