What to expect from the Fed in 2025

TheStreet’s Conway speaks with Brian Jacobsen, Chief Economist at Annex Wealth Management, about what to expect from the Fed in 2025.

Transcript

00:00Well, the Federal Reserve is set to hold its first policy meeting of 2025.

00:04Tell me, what are you expecting to see in terms of interest rates?

00:09I think that they're probably on pause for this upcoming meeting, mainly because we know

00:14that they have revised up their inflation expectations for 2025, some by more than others.

00:21And so I think that really what they want to see is what are the policies that are actually

00:26being implemented out of the new Trump administration before they decide whether or not they can

00:32continue with the cutting path.

00:35My expectation is that come March, they'll probably be in a position to be comfortable

00:40once again to start cutting, but maybe at a dramatically slower pace than what they

00:46have been cutting so far.

00:49So slower pace, how many rate cuts do you think the Fed will deliver in 2025?

00:55It seems like the market is all over the place with this one.

00:58It really is.

00:59The market has gone from, you know, if you think about maybe like four cuts down to one,

01:04if not zero.

01:05The Fed itself seems to be penciling in two rate cuts.

01:09And I think that's a reasonable base case where if we think about where rates are right

01:14now, they're still higher than what the so-called neutral rate is.

01:20So monetary policy is still restrictive.

01:23And I think that they can afford to cut maybe two more times, once in March, and then once

01:29again in June before they're going to want to take maybe a more prolonged pause.