The Federal Reserve’s interest rate cut forecast for 2025 is less optimistic than anticipated, but tax-exempt municipal bonds remain a strong investment option. Despite three rate cuts in 2024, only two more are expected next year, emphasizing uncertainty in future rate paths. Municipal bonds provide excellent income, particularly for high-income investors in high-tax states, as their interest is federally tax-exempt. The potential expiration of tax provisions from the Tax Cuts and Jobs Act in 2025 may influence demand. Overall, municipal bonds are considered financially sound, with attractive yields and solid fundamentals supporting long-term investments, especially in longer maturities.
