Wall Street Predicts a Pause in Rate Cuts in 2025

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In today’s big story, the Fed is likely to cut rates again today, but don’t bank on more coming after that.

What’s on deck

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But first, it might be the last one for a while.

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The big story

Here today, gone tomorrow

Enjoy today’s rate cut because it might be the last one for a while.

The Fed is expected to make its third-straight rate cut this afternoon, but the certainties end there, write Business Insider’s Ayelet Sheffey and Madison Hoff.

Plenty of people on Wall Street believe today marks the end of the Fed’s three-month rate-cutting spree, writes BI’s Matthew Fox. Yardeni Research and Goldman Sachs both warned the Fed might take a breather when it meets again at the end of January.

Apollo’s top economist, Torsten Sløk took things a step further, suggesting a potential rate hike in 2025.

So what’s giving the Fed … pause? (Sorry. I had to do it.)

First, inflation is still very much a thing. While prices have improved since 2022, we’re not at the 2% target Fed chair Jerome Powell set as a long-term goal. It’s also ticked up a bit, with the consumer price index hitting a 2.7% year-over-year growth rate in November.

Meanwhile, the recent jobs report also shows the labor market is in a decent spot.

Those figures aren’t exactly where the Fed would like them to be, but they’re also not so bad that the central bank would adjust rates after today’s announcement to enact change.

One other factor has market watchers unsure about the Fed’s next move: the incoming president.

President-elect Donald Trump has made clear he intends to make big changes once he’s in office. Talk of widespread tariffs, in particular, has some investors on edge.

Many economists believe Trump’s trade plans will lead to higher inflation, as companies raise prices to pass on the taxes they face to customers.

(It’s not a bulletproof prediction. Trump implemented tariffs during his first term and inflation decreased, and some believe that could happen again.)

There’s another twist: Trump might not do anything with tariffs. The president-elect’s tough talk could be a negotiation tactic to get better terms from China, Canada, and Mexico on various topics.

All that uncertainty puts the Fed in a tricky spot. Powell recently said the Fed couldn’t make policy changes based on something that “lies well into the future.” Instead, it needs to focus on the here and now.

So that means a rate cut today, and who knows tomorrow.

News brief

Top headlines

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3. The best bet for investing in 2025, according to Morgan Stanley’s top stock strategist. It’s time to hit the gym (sort of), as Mike Wilson recommends a barbell investment strategy. That means a mix of high and low-risk assets, which could be a good bet with potential market uncertainty in 2025.

3 things in tech

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2. Wall Street is lovin’ AppLovin. Mobile ads and gaming company AppLovin recently had its market value surpass the $100 billion milestone, and shares are up more than 780% this year. However, some ad industry insiders are skeptical about how long its run can last.
3. A $3 billion AI startup added Stripe’s CFO to its board. Vercel, which offers AI tools to developers, said on Tuesday that Stripe CFO Steffan Tomlinson was joining as a director on Vercel’s board. Tomlinson has experience taking tech companies public, even though Vercel is early in its life cycle.

3 things in business

1. Rapper unraveled. Since his rise to fame in the late 1990s, Sean “Diddy” Combs had built a business empire and become one of the richest and most well-connected entertainers of all time. But it all began to unravel when he was hit with a criminal indictment — which he pleaded not guilty to — and dozens of civil lawsuits. How his world fell apart in a year.
2. Rich musicians got millions in pandemic relief — and American taxpayers footed the bill. Stadium performers like Lil Wayne and Chris Brown billed US taxpayers for luxury hotels, private jet flights, and shopping sprees. They did it by taking advantage of a pandemic relief program intended for smaller arts organizations, a BI investigation found.
3. Don’t trust that Zestimate. Zillow’s popular automated home valuation is wrong. A lot. But Americans still love it — and that obsession is a big win for Zillow.

In other news

The Insider Today team: Dan DeFrancesco, deputy editor and anchor, in New York. Grace Lett, editor, in Chicago. Ella Hopkins, associate editor, in London. Amanda Yen, associate editor, in New York. Milan Sehmbi, fellow, in London.