Traders are waiting for an interest rate cut in December

The Federal Reserve is likely to cut interest rates by a quarter of a point on Wednesday – its third cut in a row – but investors should not expect the central bank to keep the same pace next year, UBS said.

“Overall, we think investors should anticipate a slowdown in the pace of rate cuts in 2025 and near-term volatility as markets recalibrate the Fed’s stance,” Solita Marcelli, chief investment officer of the Americas for UBS Global Wealth Management, wrote in a Wednesday report.

There is a silver lining to the short-term market turbulence, as investors who are underallocated to stocks can snap them up, she said.

Investors should also use any excess cash they have in high-quality and diversified fixed income and equity income strategies, she added.

“These can offer income generation and portfolio diversification as lower interest rates are likely to erode returns on cash next year,” Marcelli said.

—Darla Mercado

The Federal Reserve has cut interest rates by three-quarters of a point since the end of its September meeting, but borrowers aren’t seeing a whole lot of savings yet.

The interest rate on a 30-year fixed mortgage is 6.95% in the week of December 13, according to MND. That’s up from 4.29% in the week of March 11, 2022 – and that’s up from 6.12% in the week of September 13, 2024. Mortgage rates are tied to the 10-year government bond yield, which has risen this fall.

Credit card rates haven’t changed much since the Fed started its rate cuts. They are sitting at 20.35% as of last week, according to Bankrate. That’s down from 20.78% in September, but up from 16.34% in March 2022.

However, the yield on savings has fallen in the past three months. The annual percentage rate of return on a five-year certificate of deposit 2.86% in the week of December 13, according to Haver. That’s down slightly from 2.87% in mid-September, but up sharply from 0.50% in March 2022.

—Darla Mercado, Nick Wells

The Federal Reserve is widely expected to cut interest rates by a quarter point on Wednesday. What is less certain is how it will continue to fare in the new year and beyond.

While inflation has cooled since the Fed began its rate hike campaign in March 2022, the last stretch is proving difficult. The November CPI reflected 12-month inflation of 2.7%. That’s still a long way from the Fed’s 2% inflation target.

Stubborn inflation and an economy that remains resilient are causing some on Wall Street to temper their expectations for rate cuts in 2025. December’s “dot plot” will give traders a sense of where Fed policymakers see interest rates headed in the new year.

Read more from CNBC’s Jeff Cox on what to expect from the Fed on Wednesday.

—Darla Mercado