Interest Rates News: Fourth Quarter 2025

The Federal Reserve Open Market Committee (FOMC) eased monetary policy by 0.25% in September 2025, lowering the Federal Funds Rate to a 4.00%-4.25% range with expectations for further cuts. Economic projections indicate slightly higher inflation and moderate growth, with upcoming meetings in October and December potentially bringing more rate adjustments.

Despite short-term rate cuts, long-term borrowing costs like the 10-Year U.S. Treasury yield remain stable within historic ranges, while mortgage rates have dipped. Borrowers should consider current term rates for financing, as waiting for future declines may not be advantageous given market patterns.

Source: Bloomberg & Synovus, September 19, 2025

Federal Funds Rate Update

• The FOMC met twice in the third quarter. In July, the Committee elected to keep the Federal Funds Target Rate (Fed Funds) the same — between 4.25% and 4.50% despite two objections to ease policy by 0.25%. However, at their September meeting, the Committee did ease policy by 0.25% (with one dissenter wanting an ease of 0.50%) and expects to maintain Fed Funds between 4.00% and 4.25% going forward.
  
  
• In both meetings, the FOMC stated “recent indicators suggest that growth of economic activity moderated,” and that “the unemployment rate … remains low,” while acknowledging that “inflation … remains somewhat elevated.”
  
  
• Chairman Jerome Powell, in both post-statement press conferences, said “We will continue to determine the appropriate stance of monetary policy based on the incoming data, the evolving outlook, and the balance of risks” prior to making any further adjustments to Fed Funds.
  
  
• The FOMC Summary of Economic Projections, which accompanied the September 17 meeting release, showed the average member expects a slight upgrade to growth expectations over the next three years. This forecast includes a slightly lower unemployment and inflation rate in 2026, as well as 2027.
  
  
• The Committee lowered 2025 Fed Funds to suggest an additional two 25-basis point cuts this year. However, seven of the 19 members suggested additional easing wasn’t warranted, highlighting the uncertainty with which monetary policy will evolve in the months ahead.
  
  
• The FOMC meets again October 29 and December 10. At time of this writing, the market assigned +/- 90% probability that there will be a 25-basis point cut at both meetings. However, these expectations could shift significantly if the underlying economy, particularly the labor market, shows strength in the months ahead.
  
  
• Fourth quarter economic data offer clues to the future path and timing of monetary policy adjustments as the FOMC tries to solve the riddle of balancing job growth with elevated inflation.

Term Borrowing Rate Update

• While the FOMC is responsible for monetary policy and has more influence over short-term interest rates, numerous factors that are difficult to predict affect longer-term interest rates such as U.S. Treasury securities and swap rates.
  
  
• To assess the level of term borrowing rates, 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 fell throughout the quarter. The 10-Year U.S. Treasury yield reached almost 4.00% and the Bankrate.com 30-year fixed national average mortgage rate fell below 6.50% as implied future growth expectations declined. However, in the several days following the FOMC decision to cut short-term rates, longer-term yields rose.
  
  
• Despite the increase in longer-term yields, the 10-Year U.S. Treasury remained between the 4.00% and 4.60% range for more than two years. Seventy-five percent of the weekly observations occurred between these two levels despite changing economic forecasts, fiscal policies, equity market rallies and corrections, and FOMC policy that tightened and eased during this time.
  
  
• Borrowers should consider what occurred last year when the FOMC cut rates by 0.50% in September 2024, as well as the almost-equal increase in the 10-Year U.S. Treasury yield, when considering financing decisions. This 10-Year U.S. Treasury yield increased when the FOMC cut rates in October and December 2024, as well.
  
  
• While past performance is not an indicator of future results, borrowers shouldn’t assume that term rates will be lower in the future. Instead, they should consider taking advantage of existing rates that 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.