Leading Banks Forecast Multiple US Interest Rate Cuts in 2025
Several prominent financial institutions, including Bank of America, Goldman Sachs, and Citigroup, have revised their outlooks to anticipate at least two reductions in the US Federal Reserve’s benchmark interest rate during 2025. This shift follows weaker-than-expected employment data released in August, which showed a mere 22,000 jobs added compared to forecasts of approximately 75,000.
Revised Economic Forecasts Following Soft Labor Market
Bank of America analysts have reversed their prior stance of no rate cuts next year, now projecting two 25 basis point (bps) reductions slated for September and December, as reported by Bloomberg. Goldman Sachs economists foresee three 25 bps cuts spread across September, October, and November. Similarly, Citigroup projects a cumulative 75 bps easing, with 25 bps cuts in September, October, and December, according to Reuters.
Market expectations align with these forecasts. Data from the Chicago Mercantile Exchange (CME) Group indicate that over 88% of traders anticipate a 25 bps cut at the upcoming Federal Open Market Committee (FOMC) meeting in September, while about 12% expect a more aggressive 50 bps reduction.
Implications for Crypto Markets and Broader Economy
Lower interest rates generally increase liquidity and encourage risk-taking, which historically supports higher prices in cryptocurrency markets. Conversely, elevated rates tend to dampen asset valuations. The consensus around impending rate cuts is therefore viewed as a potential bullish catalyst for crypto assets.
Federal Reserve Chair Jerome Powell hinted at the possibility of easing during his August 22 keynote at the Jackson Hole Economic Symposium, citing emerging signs of a weakening labor market. The US Bureau of Labor Statistics (BLS) has revised job growth figures downward, with June 2024 employment data adjusted lower by 160,000 jobs and overall 2024 job estimates reduced by approximately 818,000. Speculation exists that 2025 figures could also be revised downward by up to 950,000 jobs, highlighting ongoing labor market softness.
These developments underscore the Fed’s dual mandate challenges of fostering maximum employment while maintaining price stability, increasing the likelihood of accommodative monetary policy in the near term.
FinOracleAI — Market View
The revised forecasts for multiple interest rate cuts in 2025 represent a positive signal for risk assets, including cryptocurrencies, as lower rates typically bolster liquidity and investor appetite for higher-yielding assets. However, the risks associated with a weakening labor market and potential inflationary pressures remain key factors to monitor. Market participants should watch upcoming economic data releases and Federal Reserve communications closely to gauge the timing and scale of monetary easing.
Impact: positive
