What are the Odds of a Fed Rate Cut Tomorrow, June 18, 2025?

So, you're wondering what the odds are of a Fed rate cut tomorrow, June 18, 2025? The overwhelming consensus points to the Federal Reserve holding steady on interest rates. The CME Group's FedWatch Tool, a reliable gauge of market expectations, shows an incredibly high 99.9% probability that the Fed will maintain the federal funds rate within its current range of 4.25% to 4.5%.

But beneath the surface, there's a lot more to unpack than just a simple “no cut” prediction. Let's dive into the factors at play and consider what might shift the odds moving forward.

What are the Odds of a Fed Rate Cut Tomorrow, June 18, 2025?

For a while now, the Fed has adopted a wait-and-see approach. They've been keeping a close eye on a bunch of things before making any sudden moves. The main reason is uncertainty about the economy. President Trump's tariffs complicate things, and the Fed wants to see how they'll impact prices and growth. The most recent job numbers also played a crucial role. May's report showed a slowdown in job creation, which added more pressure on the Fed to consider a rate cut.

Holding steady sends a clear message: the Fed isn't panicking, but they're also not ignoring the potential risks. As an economist, I believe this is a sensible approach. It gives the Fed breathing room to assess how things unfold before making any decisions.

Why No Cut? Key Factors in Play

Here's a breakdown of the elements influencing the Fed's expected decision:

• Tariff Uncertainty: President Trump's trade policies have injected a significant dose of uncertainty into the economic outlook. Tariffs can impact both inflation (by raising import costs) and economic growth (by disrupting supply chains and trade flows). Investors are unsure about the future of tariff policies and believe that uncertainty over tariff policy remains high.
• Mixed Economic Signals: While certain economic indicators might suggest a need for lower rates (like the aforementioned jobs report), others are more positive. This mixed bag makes it difficult for the Fed to justify a rate cut at this point.
• Historical Data: The benchmark interest rate has been at its current range since December. In recent times, the FED has been very cautious in reducing the rates and has always taken a measured approach.

Beyond the Headline: What Experts are Saying

It is important to not only read news headlines but also understand what industry experts are saying.

• Economists and Analysts' Predictions: The CNBC Fed Survey shows that most experts believe the Fed will hold rates steady at the current meeting and then cut rates once (a 25 basis point rate cut) next year to bring the funds rate down to 3.9% by year-end.

The Stagflation Scenario: A Potential Game-Changer

One of the biggest concerns looming over the economy is the possibility of stagflation – a nasty mix of high inflation and slow economic growth. So what if this really happens?

• Expert Opinions on Stagflation Response: According to the CNBC Fed Survey, more than half of respondents believe the FED will cut rates in a stagflationary environment.

Recession on the Horizon?: Evaluating the Risk

Another critical factor the Fed constantly monitors is the probability of a recession.

• Recession Probability: The CNBC Fed Survey also reveals that the risk of a recession in the next year has decreased. However, it remains higher than it was before President Donald Trump's tariff policy was implemented.

The Road Ahead: What to Watch For

So, what could change the Fed's mind and increase the odds of a rate cut sooner rather than later? Here are a few key things to watch:

• Changes in Tariff Policy: A significant easing of trade tensions or a rollback of tariffs would remove a major headwind for the economy and could open the door for a rate cut.
• Worsening Economic Data: A string of disappointing economic reports (e.g., weak GDP growth, declining consumer spending, rising unemployment) would put pressure on the Fed to act.
• Inflation Trends: If inflation starts to fall more rapidly than expected, the Fed might have more leeway to lower rates without fear of overheating the economy and this could change investor sentiments.

My Take on the Situation

Based on the available data and expert analysis, I think the Fed is right to stay the course for now. We have to wait and analyze Trump's Tariff policies further and see how they are implemented. I believe the Fed needs to see more definitive evidence that the economy is faltering before pulling the trigger on a rate cut. Patience is key when monetary policy is involved. As Constance Hunter, chief economist at the Economist Intelligence Unit, aptly put it, “The see-saw between slower growth and adverse supply shocks is difficult to forecast; however, we expect slower growth will ultimately be what causes the Fed to move closer to a neutral stance.”

The Bottom Line

Don't expect a rate cut tomorrow. That's the simple answer. As an investor, I have learned that the key to thriving is to be aware of the possible market changes and know how to implement your strategies in these scenarios. Understanding the factors influencing the Fed's decisions and remaining vigilant about changes in the economy is the key to thriving in today's markets. The Fed's decision-making process is complex and data-dependent. It's possible the Fed may take a different course than expected if the economy changes unexpectedly.