The US Federal Reserve is anticipated to proceed with another interest rate cut.
The majority of experts agree there is potential for a 25-basis point (bps) cut at the next Fed Policy meeting, taking place on Thursday. This move aims to adjust policy amidst moderating inflation and a softening labour market; and follows on the 50 bsp cut announced in September.
Larry Fink, the CEO of Blackrock, is among those supporting this prediction. “I think it’s fair to say we’re going to have at least a 25 [bsp rate cut],” Fink said during a panel hosted in the eighth edition of Saudi Arabia’s Future Investment Initiative.
Moreover, market predictions point towards a high possibility of another quarter-point cut in December and multiple reductions through 2025, which could bring the rate to a range of 3.75%-4.0% by the end of 2025.
However, this prediction might have been altered by the results of the US election, which might lead the Fed to stall its progress on interest rates.
Some economists view President-elect Donald Trump’s economic programme as inflationary, with steep tariff hikes and further tax cuts. This has been reflected in the past two days, as stock markets, Treasury bonds and cryptocurrencies experienced record surges. Deutsche Bank’s economists said the Fed’s preferred core inflation gauge could now end next year around 2.5% rather than the 2.2% they previously predicted. “These revisions would imply a stalling out in progress on the inflation front over the next two years,” the bank told Bloomberg.
The most agreed-upon view is that this slowdown will take place in 2025. JPMorgan Chase changed its back projections for 2025 rate cuts, predicting a cumulative 50 basis points of reductions in H1 2025 rather than a percentage point. Nomura Holdings’s analysts have followed a similar path, predicting one rate cut in 2025, rather than the previously anticipated four.
“A key question here is, what’s the end point of this rate cut cycle?” Bill English, the Fed’s former Head of Monetary Affairs told CNBC. “Fairly soon, they’ve got to think about, where do we think this rate cut period changes with the economy looking pretty strong. They may want to take a pause fairly soon and see how things develop.”
Jerome Powell’s post-meeting announcement is set to be watched closely for reflections of the elected US President and insights into future rate cuts and inflation management.