When Will Interest Rates Go Down in the US? 2025 Forecast

Last Updated on August 13, 2025

When will interest rates go down? That’s the question on the minds of millions of Americans navigating high borrowing costs and tighter financial conditions. As inflation cools and economic growth slows, hopes are rising that rate cuts could be on the horizon. In this post, we’ll explore how interest rate decisions are made, what the latest economic data suggests, and what financial experts are forecasting for 2025 and beyond. Whether you’re looking to refinance your mortgage, reduce debt, or plan for future investments, understanding interest rate trends is essential for making informed money moves.

The Role of the Federal Reserve in Interest Rate Changes

The Federal Reserve plays the central role in setting U.S. interest rates through its monetary policy decisions. When inflation is high, the Fed typically raises rates to cool demand. Conversely, when economic growth slows or recession risks rise, the Fed may cut rates to stimulate borrowing and investment.

The Federal Open Market Committee (FOMC) meets regularly to review economic data and adjust the federal funds rate accordingly. Rate hikes or cuts then ripple through the economy, influencing everything from mortgage rates to credit card APRs.

Understanding this mechanism is key to predicting when interest rates might go down—because no change occurs in a vacuum.

Economic Indicators That Influence Rate Decisions

Several key economic indicators help determine whether the Federal Reserve is likely to cut interest rates:

Inflation Rate: As of mid-2025, inflation has cooled to around 2.7%, down from 7–9% highs in 2022–2023. The Fed’s target is 2%, making current levels more manageable but still slightly above goal.
Unemployment Rate: At 4.2%, the job market remains resilient, but early signs of weakening—especially in tech and manufacturing—suggest room for stimulus.
GDP Growth: The U.S. economy grew by 3% in Q2 2025, beating expectations since there was a -0.5% contraction in Q1. Growth reduces pressure on the Fed to ease borrowing costs.

Together, these indicators show that conditions may not support a shift in policy anytime soon. But timing remains uncertain, hinging on inflation trends and global financial stability.

What Experts Are Predicting for 2025 and Beyond

Financial analysts and economists have mixed opinions on the rate outlook, but most agree that cuts are more likely in early to mid-2026 if inflation continues to trend downward.

Goldman Sachs recently revised its forecast, now predicting two quarter-point rate cuts by Q3 2026.
Moody’s Analytics suggests the Fed could move sooner if economic weakness accelerates.
A June 2025 survey of economists by Bloomberg found that 65% expect the first cut before March 2026, with only 15% expecting movement in late 2025.

Although the answer to “when will interest rates go down?” remains uncertain, signs are pointing toward a potential shift within the next 6–12 months. We think that the shift might be sooner rather than later. In the time of writing stocks have risen because investors factor in potential Fed rate cut in September. Around 94% of traders expect that outcome according to yahoo finance. Investors aren’t always right but this is a positive sign in that direction.

How Interest Rate Changes Affect Consumers and Borrowers

For regular people, even a small drop in interest rates can make a big difference:

Mortgage Rates: Fixed 30-year mortgage rates remain above 6.5%, but could fall closer to 6% or lower with rate cuts, improving affordability.
Auto Loans: A rate cut could reduce monthly payments on both new and refinanced car loans.
Credit Card APRs: Currently averaging 20.7%, a reduction in benchmark rates would gradually ease these high costs.

Lower rates mean easier access to credit—but also lower savings yields. It’s a double-edged sword, and borrowers should act strategically based on their specific goals.

What You Can Do While Waiting for Rates to Drop

While waiting for interest rates to go down, there are smart financial steps you can take now:

Pay down high-interest debt, especially variable-rate balances like credit cards.
Consider fixed-rate refinancing if you anticipate future cuts.
Boost savings using high-yield savings accounts or CDs before yields fall.
Improve your credit score to qualify for better loan terms when rates eventually decrease.

By planning ahead, you can take full advantage when rate cuts finally arrive.

Final thoughts

So, when will interest rates go down? With inflation nearly under control and economic growth starting to beat estimates, the environment is still not fully favorable for cuts—possibly serious movements can happen by early or mid 2026. For now, the Fed is signaling patience but investors are expecting a change sooner in the second half of this year. For everyday consumers and investors, it’s time to prepare: better borrowing conditions could be on the horizon.