{"id":13634,"date":"2025-01-22T21:28:52","date_gmt":"2025-01-22T21:28:52","guid":{"rendered":"https:\/\/zacksim.com\/blog\/?p=13634"},"modified":"2025-01-22T21:28:52","modified_gmt":"2025-01-22T21:28:52","slug":"could-the-fed-raise-rates-in-2025","status":"publish","type":"post","link":"https:\/\/zacksim.com\/blog\/could-the-fed-raise-rates-in-2025\/","title":{"rendered":"Could The Fed Raise Rates In 2025?"},"content":{"rendered":"\n<p><em>Tom G. from Frederick, MD asks: <\/em>Hello Mitch, My question is about Federal Reserve policy. Do you think there\u2019s a possibility that the Federal Reserve could actually <em>raise <\/em>interest rates in 2025? If so, how damaging do you think that would be for markets? Thank you.<\/p>\n\n\n\n<p><strong>Mitch\u2019s Response:<\/strong><\/p>\n\n\n\n<p>Thanks for writing, Tom. You\u2019re asking an important question because as investors I think it\u2019s critical to consider outcomes that the Wall Street consensus may have ruled out. In this case, the possibility of rate <em>hikes <\/em>in 2025 versus rate cuts.<\/p>\n\n\n\n<p>As it stands right now, CME Group\u2019s FedWatch has the probability of a rate hike in 2025 at 0%. In the financial media and amongst economists and other prognosticators, the debate usually centers around whether the Fed will cut somewhere between one and four times. Rate hikes basically never come up.<sup>1<\/sup><\/p>\n\n\n\n<p>To be fair, I\u2019ve also argued that I believe monetary policy is currently restrictive. The benchmark fed funds rate of 4.25% to 4.5% is well above the latest headline PCE price index print on inflation, which was 2.4% year-over-year in November. The U.S. economy\u2019s strength in the face of higher rates has shifted where I think the \u201cneutral rate\u201d should be, but I still think it\u2019s a percent below where rates are today. In other words, I see runway for more cuts from here.<\/p>\n\n\n\n<p><strong><u><a href=\"https:\/\/go.steadyinvestor.com\/zim-peak-interest?source=zim&amp;medium=blog&amp;term=mitchsmailbox_zim_01_23_2025&amp;content=peak_interest\" data-type=\"link\" data-id=\"https:\/\/go.steadyinvestor.com\/zim-peak-interest?source=zim&amp;medium=blog&amp;term=mitchsmailbox_zim_01_23_2025&amp;content=peak_interest\">Navigate \u2018Peak Interest Rates\u2019 with Confidence<\/a><\/u><\/strong><\/p>\n\n\n\n<p>The rate hikes ended in July 2023, and ever since, markets have been anticipating cuts\u2014but they haven\u2019t materialized. The timing of future rate changes also remains uncertain. What seems clear, however, is that the Fed is unlikely to raise rates further in this cycle, signaling we may have reached \u201cpeak interest rates.\u201d<\/p>\n\n\n\n<p>How should you prepare?<\/p>\n\n\n\n<p>Our free report, <strong><em><u><a href=\"https:\/\/go.steadyinvestor.com\/zim-peak-interest?source=zim&amp;medium=blog&amp;term=mitchsmailbox_zim_01_23_2025&amp;content=peak_interest\" data-type=\"link\" data-id=\"https:\/\/go.steadyinvestor.com\/zim-peak-interest?source=zim&amp;medium=blog&amp;term=mitchsmailbox_zim_01_23_2025&amp;content=peak_interest\">How Investors Should Prepare for \u2018Peak Interest Rates<sup>2<\/sup><\/a><\/u><\/em><\/strong>, delivers key strategies to help protect and grow your portfolio in this pivotal environment. You\u2019ll learn:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>How to manage your cash balances effectively<\/li>\n\n\n\n<li>The implications of borrowing<\/li>\n\n\n\n<li>Retirement strategies in a high-rate world<\/li>\n\n\n\n<li>How the stock market could react<\/li>\n\n\n\n<li>And more\u2026<\/li>\n<\/ul>\n\n\n\n<p>If you\u2019re investing $500,000 or more, click below to download your free copy today and stay ahead in uncertain times.<\/p>\n\n\n\n<p><strong><span style=\"text-decoration: underline;\"><a href=\"https:\/\/go.steadyinvestor.com\/zim-peak-interest?source=zim&amp;medium=blog&amp;term=mitchsmailbox_zim_01_23_2025&amp;content=peak_interest\" data-type=\"link\" data-id=\"https:\/\/go.steadyinvestor.com\/zim-peak-interest?source=zim&amp;medium=blog&amp;term=mitchsmailbox_zim_01_23_2025&amp;content=peak_interest\">Get Our FREE Guide:\u00a0<em>How Investors Should Prepare for \u2018Peak Interest Rates\u2019<\/em><sup>\u00a02<\/sup><\/a><\/span><\/strong><\/p>\n\n\n\n<p>That being said, the Fed has signaled that they\u2019re becoming increasingly cautious about moving too fast towards the neutral rate, particularly as non-monetary policy forces\u2014like high fiscal deficits and \u2018risk-on\u2019 sentiment in capital markets\u2014are providing meaningful tailwinds to economic demand. Put another way, the U.S. economy has been growing strongly even with the benchmark fed funds rate above 4.5% or even 5%, so there is not a strong rationale to keep lowering rates with inflation still above 2%.<\/p>\n\n\n\n<p>\u2018Policy uncertainty\u2019 is also a new area of focus that may have the Fed rethinking their overall positioning. The incoming administration\u2019s tariff, immigration, and tax policies may combine to produce some level of price pressures, and the Fed may find themselves in a position of wondering if they lowered rates too quickly. If a 10% universal tariff raises inflation above 3%, for instance, while pro-growth policies heat the economy even further, the story could easily become about whether the Fed needs to raise rates.<\/p>\n\n\n\n<p>As for the market response, I think it would depend on why the Fed decided to pivot from cuts to hikes. If inflation heats back up because the economy is performing far better-than-expected, equity markets may wobble in the short-term in response to rate hikes but would ultimately trend higher as economic growth drives earnings growth, in my view. If the Fed is raising because tariff policy is raising prices considerably for U.S. households, that would be a problem, and the real pain would arguably come from the impact that higher inflation would have on long duration Treasury yields. A sharp move higher in yields would almost certainly elicit a corresponding downdraft in a fully valued stock market, with high-growth companies taking the hardest hit as doubts would emerge regarding the sustainability of growth.<\/p>\n\n\n\n<p>With the era of peak interest rates here and ongoing uncertainty surrounding future Fed moves, investors are left wondering when\u2014and if\u2014the Fed will begin lowering rates.<\/p>\n\n\n\n<p>To help you navigate this environment, we recommend downloading our free guide, <em><strong><u><a href=\"https:\/\/go.steadyinvestor.com\/zim-peak-interest?source=zim&amp;medium=blog&amp;term=mitchsmailbox_zim_01_23_2025&amp;content=peak_interest\" data-type=\"link\" data-id=\"https:\/\/go.steadyinvestor.com\/zim-peak-interest?source=zim&amp;medium=blog&amp;term=mitchsmailbox_zim_01_23_2025&amp;content=peak_interest\">How Investors Should Prepare for \u2018Peak Interest Rates\u2019<sup>3<\/sup><\/a><\/u><\/strong><\/em>, which provides essential strategies, including:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>How to manage your cash balances effectively<\/li>\n\n\n\n<li>The implications of borrowing<\/li>\n\n\n\n<li>Retirement strategies in a high-rate world<\/li>\n\n\n\n<li>How the stock market could react<\/li>\n\n\n\n<li>And more\u2026<\/li>\n<\/ul>\n\n\n\n<p>If you have $500,000 or more, click the link below to download your guide and stay ahead of market changes!<\/p>\n","protected":false},"excerpt":{"rendered":"<p>While most market watchers expect rate cuts, actions of the new administration and &#8216;policy uncertainty&#8217; could lead the Fed to rethink their positioning. <\/p>\n","protected":false},"author":3,"featured_media":13575,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[66,71],"tags":[],"class_list":["post-13634","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-mitchs-mailbox","category-private-client-group"],"acf":[],"_links":{"self":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/13634","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/comments?post=13634"}],"version-history":[{"count":1,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/13634\/revisions"}],"predecessor-version":[{"id":13635,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/13634\/revisions\/13635"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/media\/13575"}],"wp:attachment":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/media?parent=13634"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/categories?post=13634"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/tags?post=13634"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}