The FOMC cut interest rates, but the media response indicated that the cuts were less than expected. However, the headlines focused on next year’s tepid outlook for only 25 basis points of cuts are missing the forest for all the trees. While next year’s outlook is tepid, the forecast for another 50 bps of cuts this year is aggressive.
The takeaway is that the FOMC is planning to cut rates by 100 bps between September 2025 and, potentially, mid-year 2026, providing financial relief throughout the system. The first impacts will be minor; it will take time for them to compound, but, with rates set to fall significantly within a short timeframe, tailwinds can begin to form within the economy.
