Interest Rates News: Third Quarter 2025

The Federal Open Market Committee (FOMC) is currently grappling with how to balance slowing economic growth and persistent inflation. The agency anticipates two 25 basis point cuts to the Federal Funds Target Rate in 2026 and 2027. There could be rate cuts during upcoming meetings in September since the third quarter's economic data is expected to offer more clarity on the direction and timing of future monetary policy.

Longer-term borrowing rates, such as those for 30-year mortgages, initially fell early in the quarter on concerns about tariffs but reversed course due to renewed inflation worries and increased government spending from the “Big Beautiful Bill” signed on July 4. By the end of June, the 10-year U.S. Treasury yield had settled close to where it began the quarter and largely remained within a 4.00%- 4.60% range since June 2023.

Given ongoing uncertainty and a stable rate environment, borrowers should consider locking in current term rates rather than waiting for lower rates in the future.

Source: Bloomberg, Synovus as of July 7, 2025
^ Derived from swap rates

Federal Funds Rate Update

• The FOMC met twice in the second quarter and elected to keep the Federal Funds Target Rate the same — between 4.25% and 4.50%.
  
  
• In both meetings, the FOMC stated that “economic activity has continued to expand at a solid pace.” Chairman Jerome Powell, in both post-statement press conferences, said that “we are well positioned to wait” prior to making any adjustment to monetary policy rates.
  
  
• The FOMC Summary of Economic Projections that accompanied the June 18 meeting release showed a slight downgrade to growth expectations, a slightly higher unemployment rate, and a slightly higher expectation for inflation going forward, likely due to expected tariff impacts.
  
  
• The median estimate for the Federal Funds Target Rate remained the same as the March 2025 projection that suggested two 25 basis point cuts this year, but the median estimate projected fewer cuts in 2026 and 2027.
  
  
• The FOMC next meets July 30 and September 17. The FOMC currently expects that there may be a 25 basis point cut at the September meeting.
  
  
• The economic data released in the third quarter should provide additional clues to the future path and timing of monetary policy adjustments as the FOMC currently finds itself trying to solve the riddle of managing slowing growth and still elevated inflation.
  
  

Term Borrowing Rate Update

• While the FOMC is responsible for monetary policy and has more influence on short-term interest rates, numerous factors that are likewise difficult to predict affect longer-term interest rates such as U.S. Treasury securities and swap rates.
  
  
• To assess borrowing rate levels, market participants will consider short-term rate expectations, long-term forecasts for growth and inflation, and the fiscal outlook for budget deficits associated with an increasing or decreasing supply of Treasury securities.
  
  
• Term borrowing rates, including 30-year mortgage rates, moved lower during the beginning of the quarter in response to Liberation Day tariffs’ potential impact on growth. Rates soon reversed in response to inflation and deficit spending concerns associated with the Trump Administration’s proposed “Big Beautiful Bill,” which was signed into law on July 4.
  
  
• In late May, yields declined on growth concerns and the 10-year U.S. Treasury yield finished just 0.06% (or six basis points) higher than where it began the quarter. It closed at 4.23% on June 30 and remained in the recent range.
  
  
• In fact, the 10-year U.S. Treasury note has been between 4.00% and 4.60% nearly 75% of the time since June 2023 despite changing economic forecasts, fiscal policies, equity market rallies and corrections, as well as FOMC policy that tightened and eased during this time.
  
  
• Market rates suggest that customers shouldn’t wait to borrow, expecting lower term rates in the future. Instead, they should take advantage of known term rates today which remain well within historic ranges.

This “Interest Rates News Update’ is a quarterly communication. Contact a Synovus Commercial Banker or stop by one of our local branches for more details.

Tom Loffredio is Head of Synovus’ Capital Markets-Derivatives group. Loffredio’s expertise is rates, foreign exchange and commodities hedging.