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Vignesh S G
Vignesh S G
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- Dec 24, 2024 11:17 UTC
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Will the FED Increase Rates in 2025? Experts Predict 40% Chance
Despite recent cuts, rising inflation (currently 2.7%) increases the likelihood of the Federal Reserve raising interest rates next year.
Persistent inflation above the 2% target is a major obstacle to further rate cuts and a key driver behind the potential for a rate hike.
The strong US economy adds another layer, as robust growth can fuel inflation while also making rate hikes more difficult.
The US Federal Reserve recently made headlines by lowering interest rates, but what’s next?
Earlier this month, the Fed reduced the federal funds interest rate by 25 basis points, bringing borrowing costs to 4.25% – 4.5%. This was the third rate cut of the year. But here’s the twist: Experts are now predicting a surprising 40% chance that the Fed might raise rates in 2025.
How did we get here, and what could this mean for the economy? Keep reading to find out!
Here Are the Odds
One of the firms predicting a rate hike is Apollo Global Management, a leader in alternative asset management and retirement solutions. Apollo believes there’s at least a 40% chance that the US Federal Reserve will raise interest rates in 2025.
Inflation Remains a Growing Concern
At the beginning of 2024, the US inflation rate was 3.1%. By March, it had reached a yearly peak of 3.5%. Between March and September, inflation steadily dropped, reaching a low of 2.4% in September. However, inflation began to rise again, reaching 2.6% in October and 2.7% in November.
This increase in inflation is concerning. The US government’s target is to reduce inflation to 2%. Experts believe that unless inflation decreases, the Fed won’t be able to justify further interest rate cuts.
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Economic Strength Supports Rate Hike Predictions
The strength of the US economy is a major reason why experts are predicting a potential rate hike. A strong economy can lead to higher inflation, which makes it more difficult for the Fed to keep interest rates low. This could prompt the Fed to raise rates in 2025, even with inflation still above its target.
In conclusion, as inflation remains above the Fed’s target, the possibility of rate hikes in 2025 highlights the tough decisions the central bank will face.
Will a strong economy push the Fed to raise rates, or will inflation slow down on its own? Only time will tell.
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FAQs
Experts predict a 40% chance of the Fed raising rates in 2025, driven by inflation concerns and a strong economy.
Inflation has been rising due to strong economic activity and supply chain disruptions, preventing it from staying at the Fed’s target of 2%.
A rate hike in 2025 would likely increase borrowing costs, potentially slowing down the economy to manage inflation, even with growth.
Yes 
No 
