Wall Street's Steadfast Stance: Brokerages Maintain Rate Cut Projections Amid Fed's Steady Policy
In a week marked by anticipation and speculation, Wall Street brokerages have largely maintained their forecasts for interest rate cuts, following the U.S. Federal Reserve's decision to keep its policy rate unchanged. This steadfast stance comes as the central bank held interest rates steady, aligning with market expectations, while projecting two potential rate cuts within the year. However, a growing minority within the financial community is beginning to question the likelihood of any cuts, with the Fed slightly revising its outlook to suggest only a single 25-basis-point reduction in both 2026 and 2027.
Macquarie has notably adjusted its forecast, now anticipating a 25 basis point cut in 2025, diverging from its previous expectation of no cuts. Meanwhile, UBS Global Research stands out with its projection of a total of 100 basis points in cuts by the end of the year, reflecting a more aggressive stance compared to its peers. Market traders, according to data from LSEG, are currently pricing in 48 basis points of cuts by year-end, with the CME Group’s FedWatch tool indicating a 59 percent probability of a 25-basis-point cut in September.
Diving deeper into the forecasts from major brokerages, Citigroup and Wells Fargo both predict a total of 75 basis points in cuts starting in September, aiming for a Fed Funds Rate between 3.50-3.75% by the end of 2025. In contrast, J.P. Morgan, Goldman Sachs, and Barclays each foresee a more conservative single 25 basis point cut in December, projecting a slightly higher rate range of 4.00-4.25%. ING anticipates a moderate approach with two cuts in the latter half of 2025, targeting a rate of 3.75-4.00%.
Interestingly, Morgan Stanley and BofA Global Research are among the few maintaining a stance of no rate cuts, projecting a Fed Funds Rate of 4.25-4.50% by the end of 2025. Deutsche Bank and Macquarie align with the single cut forecast for December, while UBS Global Research’s aggressive approach suggests a significant shift in monetary policy strategy.
These varied forecasts underscore the complexities and uncertainties facing the U.S. economy as it navigates through a period of potential monetary easing. The implications of these projections are profound, influencing everything from consumer borrowing costs to corporate investment strategies. As Wall Street brokerages hold their ground, the financial world watches closely, poised for any shifts in the economic landscape that could redefine the trajectory of interest rates in the coming years.
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In the upcoming weeks, the U.S. Federal Reserve's decision to maintain the policy rate steady amid expectations of potential rate cuts will largely influence financial markets, economic planning, and institutional strategies. The continuous stability in high interest rates suggests that the Fed is prioritizing its dual mandate of maximum employment and inflation control, amid rising global economic uncertainties. The expectations set by Wall Street brokerages, which predict various scales of rate cuts, reflect the financial sector's anticipation of macroeconomic stimuli, especially if economic downturn indicators emerge. Historically, such situations lead to market volatility, with investors and companies adjusting portfolios and strategies to brace for possible monetary easing. For the Fed, balancing the signals of economic slowdown with ultimate outcomes on inflation control will be crucial. The differential predictions by brokerages suggest hesitancy in the financial ecosystem, with actions ranging from moderated speculative investments to re-evaluation of asset management strategies. Inflation metrics, employment data, and fiscal policy reactions will be the primary areas to watch as they greatly influence the Fed's potential deviation towards policy adjustment. The outcome of this period involves careful observation of economic dynamics, where hesitation could either provide a cushion during sluggish economic periods or lead to delayed reactions to inflationary pressures, thus affecting long-term growth.