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The U.S. Federal Reserve signaled this week that more interest rate cuts are on the horizon, suggesting a gradual easing cycle that could extend well into 2027.
According to the Fed’s latest “dot plot” — a chart illustrating policymakers’ projections for future interest rates — officials expect the benchmark federal funds rate to decline steadily over the next two years. The projection reflects growing confidence that inflation is cooling and that the economy may no longer require restrictive borrowing costs.
At his Wednesday press conference, Fed Chair Jerome Powell said policymakers now anticipate the federal funds rate will fall to 3.6% by the end of 2025, 3.4% by the end of 2026, and 3.1% by the close of 2027.
Source: create.vista.com
This outlook underscores a shift toward a more accommodative monetary stance after a prolonged tightening campaign aimed at curbing inflation. While Powell emphasized that future policy decisions will depend on incoming economic data, the consistent downward trajectory across the dot plot suggests consensus within the Federal Open Market Committee (FOMC) for sustained rate reductions.
For investors and businesses, the message is clear: the Fed is preparing for a softer rate environment — one that could support borrowing, investment, and broader market recovery over the coming years.
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