Goldman Sachs Forecasts Three 0.25% Fed Rate Cuts in Remaining 2025 FOMC Meetings

Expectations are mounting that the US Federal Reserve could implement a series of measured interest rate reductions in the latter part of 2025, with prominent financial institutions forecasting quarter-point cuts at each of the year’s remaining Federal Open Market Committee (FOMC) gatherings. This outlook reflects a delicate balancing act between cooling inflation pressures and emerging signs of labour market softening, potentially setting the stage for a more accommodative monetary policy stance as the year progresses.

Evolving Forecasts for Fed Policy in 2025

As of mid-August 2025, market participants and analysts are increasingly aligning on the prospect of incremental rate adjustments by the Fed. Drawing from recent economic indicators, including softer-than-expected jobs data from July, several major banks have revised their projections to anticipate 25 basis point reductions at the September, November, and December FOMC meetings. This would amount to a cumulative 75 basis points of easing by year-end, potentially bringing the federal funds rate down to a range of 4.00%–4.25% from its current level.

Such expectations stem from a confluence of factors. Recent labour market reports have shown a slowdown in hiring and a modest uptick in unemployment, prompting concerns that prolonged high rates could tip the economy into a slowdown. For instance, data from earlier in the year indicated that nonfarm payrolls grew by less than anticipated in July 2025, fuelling bets on swifter policy normalisation. Analysts at institutions like J.P. Morgan have brought forward their rate cut timelines, citing these labour market weaknesses alongside broader economic uncertainties.

Inflation, while still above the Fed’s 2% target, has demonstrated a downward trajectory in recent months. Core personal consumption expenditures (PCE) inflation, the Fed’s preferred gauge, has eased towards 2.5% on an annualised basis as of mid-2025, providing room for policymakers to pivot towards supporting growth. However, Fed officials have emphasised the need for “greater confidence” in sustained disinflation before committing to cuts, as highlighted in statements following the July FOMC meeting.

Key FOMC Meetings on the Horizon

The FOMC’s calendar for the remainder of 2025 includes three pivotal sessions: 17–18 September, 29–30 October (noting that November’s meeting is typically combined or adjusted), and 10–11 December. These dates represent critical junctures where Chair Jerome Powell and committee members will assess incoming data on employment, inflation, and overall economic activity.

Market-implied probabilities, derived from tools like the CME FedWatch, suggest high odds of a September cut—around 93% for a 25 basis point move—followed by further easing in subsequent meetings. This sentiment is echoed in fixed income markets, where Treasury yields have adjusted lower in anticipation of looser policy. For example, the 10-year Treasury yield has dipped amid these expectations, reflecting investor bets on a more dovish Fed path.

• September Meeting: Widely anticipated as the starting point for cuts, with analysts pointing to recent weak jobs figures as justification.
• October/November Meeting: Could see another quarter-point reduction if labour data continues to soften, though geopolitical factors or fiscal policy changes might introduce volatility.
• December Meeting: Potentially the capstone for 2025 easing, aligning with year-end economic projections and setting the tone for 2026.

Implications for Markets and the Economy

A sequence of three 25 basis point cuts would signal a cautious unwind of the aggressive hiking cycle that began in 2022, aimed at taming post-pandemic inflation. This approach contrasts with more aggressive easing seen in past downturns, underscoring the Fed’s data-dependent strategy. Economists at firms such as Forbes and Reuters have noted that while two to three cuts remain the baseline, greater uncertainty looms for the second half of 2025, influenced by factors like potential tariffs or shifts in fiscal policy under the current administration.

For investors, this outlook carries significant ramifications across asset classes. Equity markets, which rallied on hints of impending cuts, could face headwinds if inflation reaccelerates or if cuts prove insufficient to bolster growth. Sentiment from credible sources, such as Charles Schwab’s analysis following the July FOMC decision, indicates that while rates were held steady, the door appears open for reductions later in the year. Similarly, Trading Economics reports the benchmark rate at 4.50% as of June 2025, providing a historical anchor for these projections.

In the fixed income space, lower rates would likely compress yields further, benefiting bondholders but challenging savers and yield-seeking investors. Gold prices, which extended gains in early August 2025 on rate cut expectations, exemplify how commodities might respond positively to a dovish pivot. Reuters coverage from that period highlighted gold’s third straight session of advances amid bets on Fed easing.

From an economic perspective, these cuts could provide a buffer against recessionary risks. Fed Governor Michelle Bowman, in remarks reported by Fox Business, maintained an outlook for three interest rate reductions in 2025, aligning with broader consensus despite the central bank’s unchanged stance in July. This view is supported by analyst-led models, such as those from Fidelity, which balance inflation management with job market support.

Potential Risks and Uncertainties

While the narrative leans towards easing, risks abound. Persistent inflation, as flagged in CBS News reports from December 2024, could force the Fed to temper its plans—much like the scaled-back projections from four cuts to fewer in prior years. The December 2024 FOMC statement noted solid economic expansion but easing labour conditions, a theme that persists into 2025.

Moreover, external shocks, including geopolitical tensions or domestic policy shifts, could alter the trajectory. J.P. Morgan’s revised forecast, as per Reuters, incorporates labour market weakness and uncertainties around political nominations, illustrating the fluid nature of these predictions.

This table summarises analyst consensus as of 13 August 2025, based on sources like the CME FedWatch Tool and Reuters market analysis. Probabilities are subject to change with new data releases, such as the upcoming consumer price index report, which could either reinforce or undermine the case for cuts.

Looking Ahead: A Measured Approach

In summary, the anticipation of three quarter-point rate cuts in 2025’s remaining FOMC meetings represents a pragmatic response to evolving economic conditions. While not guaranteed, this path could help sustain growth without reigniting inflation, provided data cooperates. Investors would do well to monitor upcoming indicators, including August employment figures and inflation prints, for clues on the Fed’s next moves. As always, the central bank’s actions will hinge on empirical evidence, maintaining its commitment to dual mandates of price stability and maximum employment.

References

• Charles Schwab. (2025). FOMC Meeting Insights. https://www.schwab.com/learn/story/fomc-meeting
• Federal Reserve. (2025). FOMC Calendars and Information. https://www.federalreserve.gov/monetarypolicy/fomccalendars.htm
• Federal Reserve. (2024, December 18). FOMC Press Release. https://www.federalreserve.gov/newsevents/pressreleases/monetary20241218a.htm
• Fidelity Investments. (2025). Understanding the Fed Meeting. https://www.fidelity.com/learning-center/trading-investing/the-fed-meeting
• Forbes. (2025, January 5). 2025 Fed Meeting Schedule and Rate Outlook. https://www.forbes.com/sites/simonmoore/2025/01/05/heres-the-feds-2025-meeting-schedule-and-what-to-expect-for-interest-rates/
• Forbes. (2025, August 5). Fed Expected to Cut in September. https://www.forbes.com/sites/simonmoore/2025/08/05/fed-expected-to-cut-interest-rates-in-september/
• Fox Business. (2025). Fed Governor Maintains Rate Cut Outlook. https://www.foxbusiness.com/economy/fed-governor-maintains-outlook-three-interest-cuts-2025
• Reuters. (2025, August 4). Gold Extends Gains on Fed Rate Cut Bets. https://www.reuters.com/world/china/gold-extends-gains-us-rate-cut-expectations-2025-08-04/
• Reuters. (2025, August 6). Dollar Weakens on More Fed Cuts. https://www.reuters.com/world/middle-east/dollar-falls-traders-bet-more-rate-cuts-2025-08-06/
• Reuters. (2025, August 8). J.P. Morgan Revises Fed Rate Cut Timeline. https://www.reuters.com/business/jpmorgan-brings-forward-fed-rate-cut-forecast-september-2025-08-08/
• Trading Economics. (2025). United States Interest Rate. https://tradingeconomics.com/united-states/interest-rate
• Fortune. (2025, August 11). The Fed Put and Market Response. https://fortune.com/2025/08/11/fed-put-inflation-stock-market/
• ABC News. (2025). Fed Reaction to July Jobs Data. https://abcnews.go.com/Business/wireStory/top-federal-reserve-official-dour-jobs-data-backs-124512442
• CBS News. (2024). Federal Reserve Decision – December 2024. https://www.cbsnews.com/news/federal-reserve-fed-meeting-interest-rate-cut-decision-december-2024/