Washington, D.C., February 24, 2025 – Research released by the San Francisco Fed on Monday reveals that investors and economists expect the U.S. central bank to respond “strongly and systematically” to shifts in inflation and labor market conditions.
The analysis, which examined professional forecasts and bond market movements, indicates that market participants have grown increasingly sensitive to U.S. economic data - especially since 2022.
The study notes that although inflation began rising in 2021, the Fed did not initiate interest rate hikes until 2022. Similarly, deteriorating labor market data in mid-2022 spurred the Fed to reduce the policy rate by a full percentage point starting last September. Currently, the Fed’s target rate stands between 4.25% and 4.50%.
Recent economic indicators, including a survey showing business activity falling to a 17-month low, have bolstered market expectations of two quarter-percentage-point rate cuts later this year. Interest rate futures suggest that the first rate cut could come as early as June, with a second possible as early as October.
Analysts point out that concerns over slowing economic growth are now overshadowing fears of a resurgence in inflation, influencing the anticipated Fed policy moves. The findings underscore the central bank’s readiness to adjust monetary policy in response to evolving economic conditions, as financial markets continue to closely monitor U.S. economic data.
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U.S. stock markets finished mixed on Wednesday (28 January) as investors reacted calmly after the Federal Reserve left interest rates unchanged, a decision that had been widely expected and largely priced in.
U.S. industrial production rose by 0.1% in September, rebounding after a decline in August, while capacity utilisation remained unchanged, according to Federal Reserve data on Wednesday.
Broad market stocks experienced slight declines during the day, according to Alexander Morris, CEO and Chief Investment Officer of F/M Investments.
The Federal Reserve on Wednesday reduced its benchmark interest rate by a quarter point to a range of 4–4.25%, responding to slowing economic growth and persistently high inflation.
The World Meteorological Organization (WMO) has raised its forecast for the rapid emergence of a strong El Niño, warning the climate pattern is likely to drive higher global temperatures and intensify extreme weather in the months ahead.
India is investigating a data breach at Tata Electronics that exposed sensitive documents linked to Apple's unreleased iPhone 18 Pro, marking the government's first public comments on the incident.
Iran and the U.S. have concluded indirect talks in Doha without a major breakthrough, with discussions focused on maritime traffic in the Strait of Hormuz and frozen Iranian funds. Both sides are expected to meet again after the funeral of Ayatollah Ali Khamenei.
International politicians and religious leaders have paid respects to Iran's late Supreme Leader Ali Khamenei throughout the day, ahead of his six day funeral ceremony which begins on Saturday. His casket is currently on display at the Iman Khomeini Grand Mosalla in Tehran.
Germany has requested urgent talks with China's ambassador following reports that Chinese authorities trained Russian soldiers, adding fresh strain to relations between Beijing and Europe amid the war in Ukraine.
European carmakers have urged the European Union to make sure new “Made in EU” rules do not put existing investments in Türkiye and Morocco at risk.
Microsoft is expected to announce a new round of job cuts as early as next week as the technology giant looks to reduce costs, according to reports.
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