The discussion about possible interest rate cuts by the Federal Reserve (Fed) remains dynamic and exciting. Despite a recent “interest rate pause” at the Fed meeting on June 18, 2025, where the key interest rates were left unchanged in the range of 4.25% to 4.50%, there is still a significant probability for interest rate cuts in the near future.
Current Situation and Expectations
The Fed decided on June 18 to keep interest rates stable for the time being and emphasized the necessity of supporting maximum employment while bringing inflation back to the target of 2%. However, minutes from the Fed meeting in July 2025 show that several members are open to a rate cut – provided that economic data develops as expected.
The median of the FOMC members predicts a total cut of about 50 basis points in 2025 to a target range of around 3.75% to 4%, although seven out of nineteen members no longer expect a rate cut this year – an increase from earlier assessments. According to the CME FedWatch Tool, financial markets anticipate a first rate cut in September and see even a high probability (about 88%) for at least two rate cuts by the end of the year.
Investor Sentiment
Despite these partially diverging assessments from leading voices within the Fed, investor sentiment overall remains bullish. The positive development of market conditions fuels optimism regarding further economic stabilization and possible monetary easing.
Conclusion: While some advocates for a soon-to-occur rate cut reconsider their stance in light of new data or risks (“flipping”), the overall picture among investors remains optimistic. The markets are already pricing in possible cuts and show resilience to the monetary policy outlook despite uncertainties. The next key event will be the FOMC meeting at the end of July (July 29-30), where further indications for interest rate developments are expected.