Fed Officials Increase Forecasts for Level of Rates in 2025, 2026 (2024)

FAQs

What is the Fed rate projection for 2025? ›

In 2025, the median fed funds rate projection falls to 3.75-4.00%, which implies another 75 basis points worth of cuts in 2025. Please note that this projected target fed funds rate is 25 basis points higher than the projection shown in December 2023 Fed dot plot.

The median estimate for the fed-funds rate target range at the end of 2025 moved to 3.75% to 4%, from 3.5% to 3.75% in December. For the end of 2026, the median dot now shows a target range of 3% to 3.25%, versus 2.75% to 3% three months ago.

Here's where three experts predict mortgage rates are heading: Around 6% or below by Q1 2025: "Rates hit 8% towards the end of last year, and right now we are seeing rates closer to 6.875%," says Haymore. "By the first quarter of 2025, mortgage rates could potentially fall below the 6% threshold, or maybe even lower."

In the long-term, the United States Fed Funds Interest Rate is projected to trend around 4.25 percent in 2025 and 3.25 percent in 2026, according to our econometric models.

Survey: Fed will keep interest rates historically high until end of 2026.

Mortgage rates are expected to decline later this year as the U.S. economy weakens, inflation slows and the Federal Reserve cuts interest rates. The 30-year fixed mortgage rate is expected to fall to the mid- to low-6% range through the end of 2024, potentially dipping into high-5% territory by early 2025.

Interest Rates for 2021 to 2027. CBO projects that the interest rates on 3-month Treasury bills and 10-year Treasury notes will average 2.8 percent and 3.6 percent, respectively, during the 2021–2027 period. The federal funds rate is projected to average 3.1 percent.

Mortgage rates are likely to trend down in 2024. Depending on which forecast you look at for housing market predictions in 2024, 30-year mortgage rates could end up somewhere between 6.1% and 6.4% by the end of the year.

Former Treasury Secretary Lawrence Summers recently warned that interest rates on Treasury bills could remain well above 3 percent through 2030, after averaging only 1.5 percent in the last decade.

We expect the Fed to continue cutting through the end of 2025, ultimately bringing the federal-funds rate down by over 300 basis points. Our long-run expectation for the 10-year Treasury yield is 2.75%, significantly below the current yield of 4.20%, as of March 28, 2024.

Where will mortgage rates be in 10 years? ›

They also predict that mortgage rates will peak at 9.41% in May 2024, before gradually declining to 3.67% by November 2027.

If all goes well, by the time 2025 comes around, we could see mortgage rates closer to 6%, or maybe even lower. But, unfortunately, there's no guarantee.” “I expect we will end the year with rates at about 6% to 6.2% -- much higher than during the pandemic but still relatively low by historical standards.”

After its December 2023 meeting, the Federal Open Market Committee (FOMC) predicted making three quarter-point cuts by the end of 2024 to lower the federal funds rate to 4.6%.

While it's difficult to predict how interest rates will change, in December 2023, the Fed predicted it would lower the federal funds rate to 4.6% by the end of 2024. Because its the rate banks charge each other to borrow money, the fed funds rate directly impacts the rate consumers pay.

Key takeaways. The Federal Reserve is likely to cut interest rates at least once in 2024, with the largest share of officials expecting three cuts. The timing and frequency of rate cuts will depend on a variety of factors, including inflation and the labor market.

Now, Fannie Mae expects rates to be a half-percent higher (6.4%) by the end of this year, and remain above 6% for another two years, gradually declining to a flat 6% by fourth-quarter 2025. Freddie Mac's latest data shows the average rate for a 30-year fixed mortgage is currently around 6.74%.

The Federal Reserve (Fed) announced at its March 2024 meeting that it would maintain the overnight federal funds rate at the current range of 5.25% to 5.5%.

The Federal Open Market Committee's March projections for rate cuts, or the so-called dot plot, shows a median federal funds rate of 4.6% in 2024.