Ross Gerber Asks Investors To Moderate Expectations On Fed Front In 2025: 'Don't Expect Much Lower Rates'

Investors anticipating aggressive Federal Reserve rate cuts in 2025 might need to temper their expectations, according to a prominent investment manager, even as markets price in a near-certain rate cut this week.

What Happened: Ross Gerber, CEO of Gerber Kawasaki Wealth and Investment Management and a prominent Tesla Inc. investor, cautioned on Tuesday that while rate cuts are coming, the pace might be slower than many expect. “The Fed will lower but don’t assume many rate cuts in 2025. The economy has reaccelerated and inflation will hold in the 3% range,” Gerber wrote on X.

The CME FedWatch Tool currently shows a 95.4% probability of a 25-basis-point rate cut at Wednesday’s Federal Reserve meeting, marking the central bank’s third consecutive reduction following cuts of 50 basis points in September and by 25 in November.

See Also: Fed Meetings Made Stock Traders Richer In 2024: Could Wednesday Bring Last Big Rally?

Why It Matters: Recent economic data supports a more measured approach to rate cuts. November retail sales exceeded expectations, rising 0.7% month-over-month and 3.8% annually, marking the fastest pace since December 2023. This economic resilience, coupled with persistent inflation concerns, could influence the Fed’s decision-making process.

Despite the potentially slower pace of rate cuts, Gerber sees a silver lining for investors. “This is good news as earnings will be way better than expected. Just don’t expect much lower rates,” he noted.

According to a Bloomberg survey, Fed policymakers are expected to project three interest rate cuts for 2024, with the federal funds rate potentially reaching 3.5%-3.75% by December 2025.

The focus now shifts to the Fed’s updated Summary of Economic Projections and Chair Jerome Powell‘s press conference, which could provide crucial signals about the monetary policy trajectory for 2025.

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Federal Reserve illustration created using artificial intelligence via MidJourney.

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.