ABN AMRO Investment Solutions
The Federal Reserve is likely to cautiously normalize monetary policy, supporting spending through improved credit conditions.
Allspring Global Investments
We believe that the US economy can avoid a 2025 recession and that gradual rate normalization makes sense. Should these hold true, we expect short-term US rates will decline to 4% by summer 2025.
Allspring Global Investments
Internationally, the ECB will likely stabilize Europe’s short-term rates at 2%. However, we wouldn’t rule out a more aggressive approach, as the euro zone might have entered a low-growth, low-inflation environment. This would mean sales of government bonds — quantitative tightening — would end in 2025.
Allspring Global Investments
China and Japan will likely remain the outliers: Japan will aim to normalize monetary policy further while China is expected to deliver more fiscal and monetary stimuli to boost consumer demand.
Amundi Investment Institute
The global economic outlook is benign as monetary policymakers have curbed high inflation without triggering a recession. Abating price pressures will allow major central banks to cut rates further but the easing cycle will end well before policy rates reach pre-pandemic lows.
Apollo Global Management
We believe the Fed will continue to lower the fed funds rate beyond its current range of 4.5% to 4.75%, but at a slower pace than the market expects. As of this writing, the market is pricing in four 25-basis-point cuts in 2025. We think we will get fewer cuts than that. We see a fed funds rate of 4% by year-end 2025.
AXA Investment Managers
We expect a pause in Fed cuts at 4.25% in March but resuming in the second half of 2026 to 3.5% as growth slows. We expect the ECB to take an accommodative stance, cutting its deposit rate to 1.5% by the end of 2025, possibly sooner. UK rates will be cut gradually. We look for a 25-basis point cut each quarter. The BOJ will likely hike twice more by end-2025 to 0.75%, but then be forced to halt policy normalisation through 2026, as both growth and inflation ease.
Bank of America
BofA forecasts 124 rate cuts by central banks taking the global policy rate from 5% to 4%; the Fed predicted to cut rates two more times in the first half and then end its easing cycle in June; fiscal policies set to ease (German deficit to 3% GDP) or stay accommodative (US deficit 6-7% of GDP).
BNP Paribas
Uncertainty and the return of inflationary pressures in the second half 2025 look set to keep the Federal Reserve on hold throughout 2025.
BNY
In the US, our outlook calls for modest growth and a non-linear path of disinflation. We believe that the Fed’s path of easing may be measured in 2025, with a total of two rate cuts. We anticipate one 0.25% cut in the first half of the year and one 0.25% cut in the second.
Capital Economics
A rise in inflation next year means that the Fed is likely to be more cautious about removing policy restrictiveness more gradually than would otherwise have been the case. We now think the Fed funds rate will end next year at 3.5% to 3.75%.
Capital Economics
We have pushed up our profile for UK interest rates after October’s Budget and now think the Bank rate will end next year at 3.75%, before dropping to a cyclical low of 3.5% in early 2026.
Capital Economics
The real policy outlier will be the BOJ, which is likely to be the only major advanced economy central bank to raise interest rates next year. We expect its policy rate to be increased to 1% by the end of 2025.
Capital Economics
With growth extremely weak and labour market conditions cooling, we think that policymakers in the euro zone will cut interest rates more aggressively than their peers in other major economies. We forecast that the ECB will lower its key policy rate to around 1.5% by the end of 2025. One consequence is that the euro is likely to weaken further: we think it will hit parity against the US dollar next year.
Capital Group
Interest rates don’t appear very restrictive to economic growth. Absent a recession, the Fed may cut less than previously expected before the election. Markets will shift their focus from the Fed to economic growth, corporate earnings, and the changing political and regulatory landscape.
Citi
The combination of the adverse demand effects from US tariffs and increased uncertainty looks to skew growth a bit lower. But this should also provide scope for foreign central banks to be somewhat more stimulative than otherwise.
Columbia Threadneedle
With underlying inflation around 2.5% and core inflation closer to 3% in the US (and not far off elsewhere), we don’t expect rates to fall as far as people think – certainly they will be higher than the 2010s.
Comerica
The Fed will see less need to cut interest rates in 2025 than signaled in their September Dot Plot. Comerica’s forecast sees the Fed cutting the fed funds target three quarters of a percent between Thanksgiving 2024 and the end of 2025.
Deutsche Bank
For Japan, a domestically driven recovery is likely to be fuelled by wage growth exceeding inflation, with the latter remaining around 2%. This should encourage the BOJ to lift the policy rate to at least 1% in fiscal year 2025.
Deutsche Bank
For Europe, the Trump victory appears overwhelmingly negative at face value, but it could shake the continent into more positive policy action over the medium term. For 2025, it’s too early for the positive scenario to be considered and the economic performance gap to the US will likely widen. In light of this, our economists have downgraded their growth forecast (0.8% in 2025) while lowering their inflation and ECB terminal rate forecast (to 1.5% by year-end 2025).
Deutsche Bank
For the UK, domestic and external headwinds are picking up heading into 2025. As such, our growth forecasts have edged lower to 1.3% for 2025 with the BOE now only cutting four times as inflation proves sticky.
Deutsche Bank
The US policy mix will stall progress on inflation, with core PCE expected to remain at or above 2.5% over the next two years, leading the Fed to halt their rate cuts. We now see the fed funds rate at 4.375% by year-end 2025.
DWS
In the bond market we expect yield curves to steepen further in 2025 as central banks’ interest rate cuts leave their mark on two-year bond yields in particular. At the end of 2025 we see the Fed Funds rate at 3.75-4% and the ECB deposit rate at 2%.
First Abu Dhabi Bank
We believe that the ECB (and to a lesser extent the BOE) should move much more quickly than the Fed in the rate easing process, bringing the ECB’s deposit rate to 2% by the middle of this year (2025). Such a rate differential outlook should help to underpin generic dollar strength in year ahead relative to both European currencies.
First Abu Dhabi Bank
We now expect the ECB to cut policy rates by 25 basis points at every meeting until June. More importantly, we expect to see further ECB easing during the second half, when the euro area neutral rate is likely to be viewed as being lower than the ECB’s 2-2.5% estimate. This being the case, global markets should be braced for the ECB’s deposit rate to fall toward 1.5% territory during the latter half of the year.
First Abu Dhabi Bank
We believe that the UK government’s budget last October will create a solid headwind against BOE easing aspirations. We believe that the Bank will now follow a slower pace of monetary easing – likely structured around quarterly (25 basis point) cuts until May (2025), and then sequentially thereafter until September 2025, which should result in Bank Rate finding a floor close to 3.5% territory.
First Abu Dhabi Bank
Faced with the aforementioned stickiness to price pressures though and the prospect of the inflationary aspect of Trump’s threatened trade tariffs and promised tax cuts, the Fed and other central banks will need to tread a very careful monetary path over the course of the coming 12 months. The FOMC could now leave rates unchanged until at least March. Moreover we anticipate a maximum of 75 basis points of cuts by the end of 2025.
Global X
In our view, the market’s rate cut expectations are slightly off, and we expect four 25 basis-point cuts from the Fed in 2025, though our confidence around the path of rate policy is likely to be impacted by tariff and tax decisions.
Goldman Sachs
Our European economists have downgraded their GDP forecasts across the region in anticipation of higher trade uncertainty, the ongoing pressures from China competition in key industries, and other spillovers. The ECB again is the primary and perhaps only institution that will need to respond, and a deeper rate cut path is the most likely outcome.
Goldman Sachs
In Japan, fiscal policy is also likely to be loosened after a disappointing election outcome for the ruling LDP, and we are increasingly confident in a domestic wage-price spiral and the ability of the BOJ to take policy rates to a higher terminal rate than the consensus among many market participants.
Goldman Sachs Asset Management
Strong underlying wage-price dynamics suggest further policy normalization by the Bank of Japan, and we anticipate gradual upward rate adjustments in 2025 as election uncertainty subsides.
Goldman Sachs Asset Management
The pace of rate cuts could accelerate throughout 2025 if the economic growth impact of the UK Budget is less significant than expected and if domestic inflation pressures continue to normalize.
HSBC Global Private Banking
It is worth monitoring the effect of changes to immigration policies, tariffs and fiscal spending on the Fed’s policy, but we don’t think the Fed will halt or reverse rate cuts till at least mid-2025.
HSBC Global Private Banking
Major Western central banks are all on a rate cutting path that should continue, while lower inflation gives consumers some breathing space. And corporate earnings have continued to surprise to the upside, proving that many companies have benefited a lot from innovation, and have suffered less from high rates than many expected.
Invesco
We expect the Fed policy rate will be around 3.5% at the end of 2025 (versus the current 4.75%), with a similar reduction expected from the BOE but slightly less from the ECB. The BOJ is the obvious exception, and we expect 50 basis points of rate rises by the end of 2025.
Jefferies
We expect central banks to continue cutting rates and move close to neutral by end 2025. What neutral is can be debatable, but we see Fed rates around 3.5/3.75% and ECB rates close to 2% by end 2025. Risk is that the Fed stops slightly above neutral while the ECB moves slightly below neutral by end of next year.
JPMorgan Chase & Co.
In Japan, we have a call for the BOJ to be more hawkish than priced by the market and favor JGB curve flatteners. We also believe that the BOJ outlook will be almost orthogonal to the US outlook as most of the inflationary pressure at present are more driven by the domestic service component and less impacted by global or US drivers, barring a global recession.
JPMorgan Wealth Management
We believe 2025 will be the year of the global easing cycle. Falling policy rates will support trend-like economic growth in the US and the euro zone, but not boost demand so much that it reignites inflation. In China, policymakers seem set on ensuring that growth stabilizes, especially in response to the increased likelihood of higher US tariff rates.
LGIM
We think it is entirely possible that Fed cuts of 100 basis points or more will arrive by March, as the fabled soft landing is at last achieved.
LPL Financial
Inflationary pressures may re-emerge as new policies are digested, so upticks in inflation could lead to changing narratives and a slower pace of Fed rate cuts than expected. The labor market continues to show signs it is slowly shifting and remains key to how the economy ultimately lands.
Macquarie
The combination of still above target US core inflation, tax cuts, higher tariffs, and reduced immigration is likely to limit the scope for further US rate cuts, with the Fed funds rate bottoming around 4% (the end of secular stagnation). The dollar is likely to continue to move higher.
Macquarie
We expect the ECB will continue easing rates to reduce the degree of restriction in its policy settings, with the deposit facility rate reaching a more neutral level of 2% by end-2025. For German 10-year yields, we do not expect significant changes over 2025 as a whole.
NatWest
We predict four more ECB cuts in the first half, bringing the policy rate down to what we think is a terminal 2%. Inflation expectations also point to around 2%, with the ECB’s expectations now just above 2%. While there are good reasons to expect a re-acceleration in European output growth in the coming quarters, recent surveys have surprised with less impressive data, dampening our view of a rebound in 2025.
NatWest
We expect 50 basis points of Fed easing in 2025, and most of this to be done in the first quarter. In the wake of the presidential election, we no longer expect cuts in April and June, owing to the inflationary pressures of increased tariffs, among several factors. We also expect the Fed’s terminal rate to exceed the neutral, or ideal, rate.
NatWest
Our BOE forecast is for terminal rates to fall to 4% in May 2025, albeit subject to slippage. While the BOE’s remit is focused on hitting 2% inflation, a fix for the country’s deeper economic woes complicates the mission.
NatWest
Whilst we expect G3 central banks to reach terminal rates before the end of the first half, these rates will be much higher than the levels settled at in previous cutting cycles, and the destination could differ significantly across regions. It is these different destinations that we expect be a key driver for foreign exchange in 2025, not just the speed at which central banks are cutting.
Northern Trust Asset Management
In the UK, NTAM expects the Bank of England to maintain a gradual and cautious approach to further interest rate cuts.
Northern Trust Asset Management
The Bank of England, with concerns over inflation, will likely cut rates at slower pace than the ECB while we expect Japan to increase its policy rate slowly.
Nuveen
Interest rates will likely be lowered more slowly than previously anticipated. In fixed income, this calls for less emphasis on duration positioning and more on generating alpha via relative spreads and credit selectivity. We expect the 10-year Treasury yield to remain mostly rangebound from here.
Pictet Asset Management
The Fed could disappoint by cutting less than the market hopes – we see its funds rate at 4.25% by the end of 2025, marginally above market consensus. But this could be offset by a relatively deeper cuts by the European Central Bank. This should spur credit demand and private money creation, and this increase in liquidity should underpinning what are otherwise rich asset valuations.
Pimco
In the US, labor markets appear looser than in 2019, heightening the risk of rising unemployment. The Fed, like other DM central banks, is expected to realign monetary policy to this new cyclical reality.
Principal Asset Management
Stagnant European economic growth implies continued disinflation, potentially pushing inflation below-target in 2025. The ECB must cut more than the Fed, taking policy rates below their neutral level.
Principal Asset Management
Come early 2025, rather than reducing policy rates at each meeting, the Fed is likely to slow its cutting pace to every other meeting — with some risk that rates don’t fall as far as either the Fed or the market initially envisioned.
Robeco
Japanese corporates continue to pass on higher PPI prices to domestic consumers, BOJ raises policy rates.
Robeco
Central bankers need to tread carefully. By underestimating inflation risks in 2025 relative to growth risks, they could cause excessive easing (lowering actual policy below the natural rate), bringing an inflationary inflection point forward in time against a backdrop of reinvigorated procyclical fiscal policy and higher cost-push inflation due to tariffs.
State Street
State Street Global Advisors believes that the rate cut cycle that started in 2024 will continue for a while longer, although the Trump-led Republican US election victory could result in a change to the narrative in the latter part of 2025. Global geopolitical forces could also play their part in rupturing long-standing economic and financial ties.
Tallbacken Capital
We are only a cut away from several estimates of the neutral rate. If the economy and inflation continue to trend the way they have, then there is a case for zero rate cuts or even a hike. We expect minimal cuts next year, moderately higher term premia, and back end rates to finish slightly higher than they are currently. We are in a tweaking cycle, not a cutting cycle.
TD Securities
Europe faces perhaps some of the biggest challenges in 2025, with geopolitics almost certain to have a negative impact on growth. Europe will be hit by US tariffs and China dumping its goods in response to US tariffs. The ECB will cut below neutral to 2% by June, while stickier inflation will see the UK cut more cautiously, pausing at 3.5% from August.
TD Securities
The path for global rates markets will hinge on the evolution of longer-term Fed pricing. We see a six-month pause after the 25 basis point cut in December. Only in the second half of 2025 – once the growth impact of tariffs and immigration policy starts to bite – does the FOMC resume its rate cut path, taking the fed funds rate to its neutral rate of 3% by spring 2026.
Truist Wealth
We anticipate the Fed will cut rates 75 to 100 basis points from current levels by the end of 2025. Notwithstanding temporary overshoots, we estimate the 10-year U.S. Treasury yield will trade primarily in a range between 3.75% to 4.50%, which should provide opportunities to adjust our current neutral duration stance.
UniCredit
Since it will take a few months for Trump’s policies to be announced and implemented, and then for these to work their way through to the economy, we think the Fed will keep cutting rates in the first half but probably at a slower pace of 25 basis points per quarter. The Fed will probably enter a wait-and-see holding period beyond mid-2025, as prospects for above-target inflation and slightly-above-trend growth would require a higher trajectory for rates than otherwise. This would leave the target range for the federal funds rate at 3.75-4% through 2026.
UniCredit
For next year, we expect a total of 125 basis points of BOE cuts, taking the bank rate to 3.5% by the end of next year. This is less than we previously expected, since the smaller tightening of fiscal policy will favour a more gradual reduction in monetary-policy restriction.
UniCredit
Although the ECB and the BOE will likely continue towards neutral territory, a less-dovish Fed might make them more hesitant.
Vanguard
Although we expect the Fed to reduce its policy rate to 4%, cuts beyond that would prove difficult as any weakening of growth would have to be weighed against a potential inflation revival.
Vanguard
While inflation is now close to target in the euro area, that has come at the price of stagnation in 2023 and 2024, with muted external demand, weak productivity, and the lingering effects of the energy crisis holding activity back. Growth is expected to remain below trend next year, as a slowdown in global trade represents a key risk. Expect the ECB to cut rates below neutral, to 1.75%, by the end of 2025.
Vanguard
We maintain our view that policy rates will settle at higher levels than in the 2010s. This environment sets the foundation for solid cash and fixed income returns over the next decade, but the equity view is more cautious. This structural theme holds even in a scenario where central banks briefly cut rates below neutral to allay temporary growth wobbles.
Wells Fargo
The Bank of Japan stands apart from other G10 central banks and is likely to continue hiking. Fiscal stimulus and higher than expected inflation drive this move. Upcoming wage negotiations could be another inflationary and consumption catalyst.
Wells Fargo
US exceptionalism may finally lead to a sustained monetary divergence between the Fed and other central banks. We also expect differentiation across G10 even excluding the Fed, due to the quite distinct fundamentals and trade exposures of the various economies.
Wells Fargo Investment Institute
We believe the Fed has flexibility to cut interest rates further, but we think policymakers will proceed cautiously based on how quickly the economy and inflation rebound.