Interest Rates News Update: Second Quarter 2025

This quarterly update highlights key economic indicators and recent Federal Reserve decisions. During recent meetings, Federal Reserve Open Market Committee (FOMC) Chairman Jerome Powell cited the strength of the economy as a reason to hold off rate adjustments. The target rate remained unchanged throughout the second quarter.

FOMC projections indicate a stable unemployment rate, slight growth downgrade and higher inflation expectations. The committee anticipates a cut at the June meeting, with further data releases likely to influence future monetary policy. Term borrowing rates are expected to fluctuate under the new administration and recent tariffs.

Source: Bloomberg, Synovus, March 24, 2025
^ Derived from Swap Rates

Federal Funds Rate Update

• The Federal Reserve Open Market Committee (FOMC) met twice in the first quarter and elected to keep the Federal Funds Target Rate the same — between 4.25% and 4.50%.


• In both meetings, FOMC Chairman Jerome Powell said that “the economy is strong overall” and that “we do not need to be in a hurry to adjust” rates further.


• The FOMC Summary of Economic Projections that accompanied the March 19 meeting reported a slight downgrade in growth expectations, a relatively stable unemployment rate and a slightly higher expectation for inflation going forward.1


• The median estimate for the Federal Funds Target Rate remained the same as the December 2024 projection that suggested two 25 basis-point cuts this year and two more next year. However, more members predicted that balancing employment and inflation may require fewer cuts.


• At the March 19 meeting, Powell stated that, “these individual forecasts are always subject to uncertainty … uncertainty today is unusually elevated.”


• The FOMC’s next meetings are May 7 and June 18. Interest rates news may include a 25 basis-point cut at the June meeting.


• The second-quarter 2025 economic data release should provide additional clues to the future path and timing of monetary policy adjustments. The FOMC is currently trying to resolve slowing growth vs. continuous 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 the level of 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, including 30-year mortgage rates, moved higher in the beginning of the first quarter 2025 as the market expected the incoming Trump administration to initiate pro-growth policies.


• Uncertainty related to government job cuts and the impact of tariffs caused term rates to decline later in the quarter. As of March 24, the 10-year U.S. Treasury yield is 4.30% which is exactly in the middle of the recent range for the past several years.


• In fact, the 10- year U.S. Treasury note has been between 4.00% and 4.60% almost 70% of the time since June 2023 despite changing economic forecasts, presidential administrations, equity market rallies and corrections and FOMC policy that tightened and eased.


• Market data suggests consumers shouldn’t wait to borrow, expecting that term rates may be lower in the future. Instead, they should take advantage of current rates 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 Managing Director of Synovus’ Capital Markets-Derivatives. Loffredio’s expertise is rates, FOREX and commodities hedging.