Will the FED Increase Rates in 2025? Experts Predict 40% Chance

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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