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CIBC Private Wealth

March 19, 2025

Economy
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US Federal Reserve building

Fed holds rate as uncertainty around the economic outlook increases

Once again, the US Federal Reserve (Fed) maintained the target range for the federal funds rate at 4.25% to 4.50%. The Fed notes that although inflation remains somewhat above the target, economic activity continues to expand, the unemployment rate is stable and labour market conditions remain solid. The Fed’s goal is to achieve maximum employment and inflation at 2%.

 

CIBC Capital Markets says there aren’t any surprises with today’s rate decision. Projections show two rate cuts this year, two rate cuts next year and one rate cut expected in 2027—totaling 125 basis points (bps) in cuts over the next three years. Although there is a wide range of views, the consensus views the neutral rate to be 3%, so the Fed still has some work to do.

 

Adam Ditkofsky, Senior Portfolio Manager, Global Fixed Income, CIBC Asset Management says we aren’t surprised to see limited market movement today because the Fed’s decision to hold rates was expected. “We’ve been reducing risk in our portfolios over the past few months, which appears to be affirmed by today’s decision with the Fed’s accompanying statement acknowledging increased uncertainty around the economic outlook. We also see the Fed’s revised outlook for gross domestic product (GDP) and the labour market as being supportive for the bond market. However, nothing was exceptionally surprising to materially move the market. Overall, we see today’s decision as being dovish and largely in line with expectations.”

 

At CIBC Private Wealth, we take a comprehensive approach to managing, building and protecting your wealth. If you'd like to discuss this market and economic update in more detail or have questions about your investments, please get in touch with me anytime.

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CIBC Private Wealth” consists of services provided by CIBC and certain of its subsidiaries through CIBC Private Banking; CIBC Private Investment Counsel, a division of CIBC Asset Management Inc. (“CAM”); CIBC Trust Corporation; and CIBC Wood Gundy, a division of CIBC World Markets Inc. (“WMI”). CIBC Private Banking provides solutions from CIBC Investor Services Inc. (“ISI”), CAM and credit products. CIBC Private Wealth services are available to qualified individuals. Insurance services are only available through CIBC Wood Gundy Financial Services Inc. In Quebec, insurance services are only available through CIBC Wood Gundy Financial Services (Quebec) Inc.


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