Market Analyst Ram Ahluwalia Affirms Current Interest Rates as Fed Maintains 4.25%-4.5% Target

New York – Ram Ahluwalia, CFA, CEO of Lumida, shared his insights on the current market landscape, particularly concerning interest rates, following the Federal Reserve’s recent decision to maintain its benchmark rate. In a social media post on July 16, 2025, Ahluwalia asserted that "Rates are perfectly fine where they are," offering a perspective that challenges calls for immediate, significant rate cuts. His commentary comes as the U.S. economy navigates persistent inflation and a slowing growth trajectory.

Ahluwalia elaborated on the potential repercussions if short-term rates were to drop significantly, specifically to 1%. He warned that such a move could lead to a "Repeat of Covid 2021 boom bust" and further exacerbate housing market accessibility issues, stating, "Another generation gets locked out of the housing market as long-end rates increase." Conversely, he suggested a "Massive bull market in small caps" and a surge in "Cathie Wood stocks" under such a scenario.

His remarks align with the Federal Reserve's cautious stance, which in its June 2025 meeting, held interest rates steady at a target range of 4.25% to 4.5% for the fourth consecutive time. Fed Chair Jerome Powell emphasized the central bank's data-driven approach, stating, "We just don’t have that greater confidence yet" regarding sustained inflation reduction. This decision was made despite public calls for rate cuts to stimulate economic growth.

The Fed's hesitation is rooted in economic forecasts projecting a core Personal Consumption Expenditures (PCE) inflation rate of 3.0% by the end of 2025, still above the central bank's 2% target. The U.S. economy is also experiencing a slowdown, with GDP growth anticipated to be 1.4% in 2025, a notable decrease from earlier projections. Unemployment is expected to rise to 4.2% by year-end, potentially reaching 4.5% in 2026.

While the Fed has signaled the possibility of two rate cuts totaling 50 basis points later in 2025, the timing remains contingent on incoming data. Some analysts, like Oxford Economics, have noted a "growing risk" of a larger 50-basis-point cut if the labor market deteriorates rapidly. However, Ahluwalia's perspective underscores a belief that the current rate environment is appropriate, reflecting a "quasi-graceful exit" from ultra-low interest rates and avoiding a recession, partly due to "massive fiscal and immigration stimulus."