Payden & Rygel: 75 bps US rate cuts during remainder of 2025

Payden & Rygel: 75 bps US rate cuts during remainder of 2025

24 juli 2025

Rente Fed

Despite a turbulent first half of the year, Payden & Rygel’s economics team remains cautiously optimistic on the U.S. economy. In their newly released Mid-Year Macro Outlook, the firm projects continued growth, moderating inflation, and a Federal Reserve likely to resume interest rate cuts before year-end.

Markets reeled earlier this year following an unexpected round of tariffs in April and rising fears of a recession. But with inflation cooling and job growth holding up, Payden sees room for a softer landing than many headlines suggest. 'Markets overreacted to the April tariff shock, but we believe the data still supports rate cuts and steady growth,' said Jeffrey Cleveland, Chief Economist at Payden & Rygel. 'If inflation continues to cool—or unemployment rises modestly—we expect the Fed to act.'

Key Insights for the Second Half of 2025:

  • Inflation Can Still Moderate: Core Personal Consumption Expenditures (PCE) inflation has slowed meaningfully. Even with tariff risks, disinflation remains on track.
  • No Recession, No Re-acceleration: Payden expects sub-trend GDP growth but sees both recession and re-acceleration risks as overstated.
  • Labor Market Easing, Not Collapsing: Downside risks to job growth will outweigh the upside pressure from the shrinking labor force, leading to a gradual rise in the unemployment rate.
  • Cuts Are Still on The Table: Payden forecasts up to 75 basis points in cuts by year-end—more than current market pricing.
  • Rates Lower Across the Curve: Fiscal concerns are already priced in. With inflation moderating and the Fed cutting, 10-year yields can still decline.
  • Dollar Weakness Likely, But the Trade Is Crowded: The greenback may remain soft with the Fed leading rate cuts, though Payden warns the short-dollar trade is crowded.

The report also grades Payden’s original 2025 forecast, issued in December 2024, and offers a measured update considering the year’s volatility. 'Moderating inflation with continued growth is a scenario underpriced in markets and underappreciated among policymakers,' the report concludes.

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