Fed likely to limit rate cuts to just one in 2025, suggests deVere Group after Fed minutes

Investing.com -- The Federal Reserve (Fed) is expected to implement no more than a single rate cut in 2025, according to Nigel Green, CEO of deVere Group. This projection is based on the latest minutes from the Fed's meeting on December 17-18, 2025. The minutes indicate a hawkish stance among officials, suggesting a reluctance to further ease rates amid persistent inflation and a strong U.S. economy.

Green asserts that the Fed's stance reflects a growing understanding that inflation continues to be a serious concern. The interest rate required to fully control inflation may need to remain higher than many had previously thought. The minutes from the Fed's December meeting showed that while the last 25 basis point rate cut had broad support, many officials favored a cautious approach to further easing.

Fed Chair Jerome Powell has previously likened the current economic situation to navigating in fog or a dark room filled with furniture. According to Green, this uncertainty is due to the dual pressures of stubborn inflation and the unpredictable economic impacts of the incoming Trump administration's tariff and tax policies.

The minutes also suggest that the Fed is concerned about the risk of inflation not returning to the 2% target without maintaining or even increasing the current level of monetary restriction. Green explains that the Fed is aware of the risks associated with premature rate cuts, which could potentially fuel further inflation, damage its credibility, and necessitate stricter measures in the future.

Green also highlighted the implications of the Fed's hawkish tone for investors, suggesting four key strategies to capitalize on the changing environment. These include exploring bond market opportunities, focusing on quality equities, ensuring inflation hedges, and avoiding overexposure to risky sectors.

Green believes that 2025 will likely see a significant slowdown in the pace of rate cuts as the Fed acknowledges the challenges of controlling inflation. He warns that markets expecting a dovish pivot from the Fed may be in for a surprise. He concludes by stressing the importance of investors adapting to the new normal of higher rates and focusing on robust, diversified portfolios.

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Source: Investing.com