Odds Now At 75% (SOMEWHAT LIKELY) The U.S. Prime Rate Will Be Cut to 6.75% At the December 10, 2025 FOMC Monetary Policy Meeting

Prime Rate Prediction

Prime Rate Forecast

As of right now, our odds are at 75% (somewhat likely) the Federal Open Market Committee (FOMC) of the Federal Reserve will vote to lower the benchmark target range for the fed funds rate (TRFFR) by 25 basis points (BPS) to 3.50% - 3.75% at the December 10^TH, 2025 monetary policy meeting, which would lower the U.S. Prime Rate to 6.75%.

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On Inflation and Tariffs

  

Here are some clips from a November 3^RD, 2025 speech by Fed Governor Dr. Lisa D. Cook, at The Brookings Institution in Washington, D.C.:
 

"...My outreach to business leaders suggests that the pass-through of tariffs to consumer prices is not yet complete. Many firms have adopted a strategy of running down their inventories at lower price levels before raising prices. Others have reported waiting until tariff uncertainty is resolved before passing increases on to consumers. New car models, clothing lines, and other products will be coming onto the market, and that process will continue to provide firms with an opportunity to level set prices. As such, I expect inflation to remain elevated for the next year.

Nonetheless, the effect of tariffs on prices, in theory, should represent a one-time increase. It is encouraging that most long-run inflation expectations, including from the New York Fed Survey of Consumer Expectations, are low and stable at this juncture. When excluding tariff effects, 12-month core PCE inflation through September appears to be about 1/2 percentage point lower at about 2.3%, suggesting that underlying inflation has continued to make progress toward target. My assessment is that inflation is on track to continue on its trend toward our target of 2% once the tariff effects are behind us. The big caveat is that tariff effects must prove not to be persistent and that monetary policy remains appropriately focused on achieving that goal.

This is a point worth dwelling on for just a moment. The FOMC's firm commitment to its inflation mandate is imperative to ensure that inflation does remain in check, as I do expect in my baseline forecast. So let me be clear. I am committed to reaching our 2% inflation target. Moreover, I will be prepared to act forcefully, if the tariff effects appear to be larger or last longer than expected, or if other evidence emerges that higher levels of inflation are becoming entrenched in expectations.

In summary, after a temporary slowdown due to the government shutdown, I expect the economy to grow moderately over the medium term, supported by an AI productivity boom. I see the labor market as still solid, but I am highly attentive to downside risks. I see inflation as remaining somewhat elevated due to tariff effects and subject to upside risks..."

"...Labor Market

I will now turn to the labor market. We have less recent official data on the labor market, but the latest available indicators suggest that the labor market remains solid, though gradually cooling. The unemployment rate edged up over this summer from 4.1% in June to 4.3% in August, a relatively low reading one would expect to see in a healthy economy. To put 4.3% into perspective, the average unemployment rate over the 50-year period preceding the pandemic was 6.2%.

Since August, more recent labor-market indicators, such as UI claims, job postings, and individuals' assessments of job availability, signal little change to the August reading -- at most a small uptick. Taken together, the slightly rising  unemployment rate indicates the labor market is softening, but only modestly so..."

• Stay tuned...

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The United States Prime Rate was lowered to the current 7.00% on October 29, 2025.

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SUMMARY

• Current odds the U.S. Prime Rate will be cut to 6.75% at the December 10^TH, 2025 FOMC monetary policy meeting: 75% (somewhat likely.)

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