Fed Will Cut Rates by 50bps in Q2 2025

Projection

The Federal Reserve will reduce the federal funds rate by 50 basis points between April and June 2025.

Rationale

Cooling inflation, weakening labor market, and tightening credit conditions will force the Fed's hand earlier than consensus expects. Core PCE has stabilized below 2.5% for three consecutive months, job openings have declined 15% from peak, and bank lending standards continue to tighten.

Evidence