Analysts predict a cautious reduction in Fed rates in 2025

Analysts expect the US Federal Reserve to cut rates by 25 bps in June and September 2025, which will eventually amount to 50 bps. At the last meeting, the regulator reduced the rate by 25 bps, bringing the total reduction since September to 100 bps, and the target range is up to 4.25-4.5%. 

However, the updated dot chart of the Fed reflected a tougher position, suggesting only a 50 bps reduction in 2025, instead of the previously predicted 100 bps. The regulator's policy may remain restrained until 2027.

Financial markets reacted with falling stocks, rising bond yields, and a stronger dollar. Jerome Powell noted that the US economy is growing above forecasts, and inflation continues to exceed the target level of 2%. This led to a more balanced approach to further rate cuts.

Analysts have revised their forecast, expecting two rate cuts in 2025. At the same time, economists admit the possibility of a March decline if labor market data deteriorates.

The Fed's tough stance strengthened the dollar, its exchange rate exceeded 108. However, experts believe that the overvaluation of the currency and limited prospects for policy easing pose risks of its weakening. The bank predicts a return of the EUR/USD pair to 1.10 at the end of 2025.