Markets are anticipating that the Federal Reserve will begin cutting interest rates later this year. In this video, Focus Partners’ Kevin Grogan breaks down the Fed’s decision to hold rates steady in May and discusses the potential implications for investors.
In May, the Fed decided to hold rates steady at 4.25%–4.5%, alongside signs of easing inflation and a softening labor market. Despite these changes, a recession seems unlikely in 2025. The yield curve has modestly normalized, with the 10-year Treasury now yielding more than the 2-year. While rate cuts are expected in September and possibly once more before year-end, markets project a higher-for-longer rate environment compared to the near-zero rates of the 2010s—a scenario that benefits savers but poses challenges for borrowers.
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