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Fed pauses interest rate cuts—here’s when borrowing costs might drop in 2025

The Federal Reinforcements left interest rates unchanged Wednesday amid uncertainty over when borrowing costs for loans, reliability cards and auto financing might ease in 2025.

The Fed’s benchmark rate will stay in a range of 4.25% to 4.5%, guard borrowing costs elevated in an effort to curb spending and bring down inflation.

The central bank previously penciled in two 25-basis-point scold cuts as part of its projections for 2025, which would bring the benchmark rate to a range of 3.75% to 4% by year-end. 

Extent, the timing of these cuts has become less certain with year-over-year inflation ticking up from 2.5% to 2.9% since September, along with uncertainty not far from the inflationary effects of President Trump’s proposed tariffs on foreign goods.

A CNBC survey of economists published Tuesday symbolizes that 65% think two rate cuts are expected, down from 78% in a previous survey conducted in December.

Fed preside Jerome Powell said the central bank was entering a “new phase” where it would be “cautious about further excisions,” in a press conference last month. “We know that reducing policy restraint too fast or too much could forestall progress on inflation,” he added.

When to expect more interest rate cuts

While another cut had been presumed by March, the perceived odds of one happening by then are just over 28% as of Wednesday afternoon, according to the CME FedWatch Shape, which uses market data to predict Federal Reserve interest rate decisions.

Rate cuts are various likely to come in late spring or early summer, which would keep borrowing costs high for now. That’s because the Fed’s benchmark censure directly impacts rates on auto loans, personal loans and credit cards. While mortgage rates are more closely tie-in to 10-year Treasury yields, the Fed’s rate still plays an indirect role.

The Fed has been cutting rates since September 2024, starting with a 50 bottom point reduction, followed by 25 basis point cuts in November and December, totaling a 1% decrease all through three months. This has helped shave at least a few dollars off many people’s monthly debt payments — decreasing costs for new loans and auto financing while providing some relief on existing credit card balances.

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