The Federal Reserve has officially announced a 25 basis point interest-rate cut, a move widely anticipated by Wall Street. Wilmington Trust chief economist and former Philadelphia Fed economic adviser Luke Tilley, along with Janney Montgomery Scott head of fixed income Guy LeBas, join Market Domination to discuss their respective 2025 monetary policy outlooks following the decision. Tilley emphasizes the central bank’s cautious approach, citing recent inflation reports. He highlights significant labor market slowdown, predicting that “the labor market is going to end up having them cut faster than even they are saying today.” He anticipates rate cuts at every meeting through September 2025. LeBas notes the Fed’s core personal consumption expenditures (PCE) inflation forecast for 2025 ranges between 2.5% and 2.7%. “If that forecast comes to pass, I think two cuts is more likely to emerge than three or four,” he says. However, he acknowledges that “the market’s going to continue to price some downside risk” to economic slowdown, with expectations of potentially three cuts in 2025. However, Tilley asserts that the only risk is the central bank avoiding any further rate cuts. He believes the Fed has reached its inflation target, with the shelter component as the primary factor maintaining elevated levels. The uncertainty surrounding the upcoming Trump administration’s potential economic policies adds complexity to future projections. LeBas argues that, in response to fiscal changes in 2025, “the Fed’s just going to act more gradually rather than more aggressively.” He anticipates today’s cut will be the last of the consistent 25 basis point series, potentially reducing to one or two cuts for the full year of 2025.
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