Economist: US unemployment rate could reach 4.4% or higher by the end of 2025

The Federal Reserve could cut interest rates more than market expectations in 2025 as inflation falls and unemployment rises, economists at Paidenreiger Asset Management said in a note on the economic outlook. They said the Fed's preferred measure of core inflation could fall below 2 percent sometime in 2025, while the unemployment rate could reach 4.4 percent or higher by the end of 2025. They also said the Fed could "easily" cut rates by more than the 35 basis points that the U.S. money market is currently expecting in 2025. The optimal level for the federal funds rate would be 3.3 percent, implying at least four rate cuts in 2025.