JPMorgan Chase (JPM) Now Expects Three Rate Cuts from the Fed in 2025

JPMorgan's chief U.S. economist, Michael Feroli, has significantly revised his Federal Reserve rate cut forecast, now expecting four 25-basis-point reductions starting September 2025, followed by cuts in October, December, and January 2026. This updated outlook, a notable increase from his previous projection of just one cut this year, is primarily driven by President Trump's nomination of Stephen Miran to the Fed board, signaling potential political influence on future monetary policy and central bank independence. This development suggests a re-evaluation of the Fed's trajectory, with implications for investor strategies.

Analysis

JPMorgan's Chief U.S. Economist, Michael Feroli, has materially altered the firm's outlook on Federal Reserve monetary policy, now projecting four consecutive 25-basis-point rate cuts beginning in September 2025 and extending through January 2026. This represents a significant dovish shift from the prior forecast of a single rate reduction in December of the current year. The primary catalyst for this revision is not economic data, but rather a political development: President Trump's nomination of Stephen Miran to the Fed's board of governors. This move is interpreted as an effort to increase political influence over the central bank, a view supported by the President's previous criticism of Chair Jerome Powell. The Fed has maintained a cautious stance since cutting rates by 100 basis points in the second half of 2024, citing the need to assess the inflationary impact of tariffs. Feroli's new forecast suggests that political pressure is expected to override this data-dependent approach, introducing a new dynamic for markets which have already seen the S&P 500 gain 9% this year.

Key Decisions for Investors

• Investors should re-evaluate their exposure to interest-rate-sensitive assets, as the prospect of an accelerated easing cycle starting in late 2025 could benefit sectors like technology and growth stocks.
• Closely monitor political developments, particularly further Federal Reserve appointments, as they are now positioned as a primary leading indicator for future monetary policy shifts, potentially superseding traditional economic data.
• Be cautious of a potential disconnect between the Fed's stated inflation-fighting mandate and policy actions that may be perceived as politically motivated, which could introduce volatility and impact central bank credibility.
• While the dovish forecast supports a bullish equity stance, investors should recognize that market performance, which is already up 9% year-to-date, is increasingly tied to political outcomes rather than purely fundamental economic strength.