Federal Reserve September Meeting: Analysts Divided Over Rate Cut Size
As the Federal Reserve's September meeting approaches, analysts and markets are split on the size of the anticipated rate cut. Will it be a 25-basis-point reduction or a larger 50-bp cut?
BCA Research believes a 50-bp cut is still possible, but it would have likely been signaled by Fed officials before the blackout period. However, New York Fed President John Williams and Governor Christopher Waller did not hint at a jumbo cut, leading to expectations of a 25-bp reduction. Despite this, futures markets are now pricing in a 48% chance of a 50-bp cut, driven by recent comments and articles.
HSBC also supports a 25-bp cut in September, followed by an additional 50 bps of cuts through 2024. The bank remains optimistic about U.S. Treasuries and the U.S. dollar, despite potential market volatility.
Bank of America points out the uncertainty surrounding the Fed's next move. While the market is leaning towards a 50-bp cut, BofA believes a 25-bp reduction is more likely. They also anticipate Fed Chair Jerome Powell addressing labor market risks and potentially hinting at faster rate cuts.
Barclays expects a 25-bp cut but sees room for larger cuts if labor market conditions worsen. They project a total of 75 bps in cuts by 2024.
JPMorgan stands out with a call for a 50-bp cut, arguing that front-loading cuts would better prepare the Fed for potential economic risks. However, internal FOMC dynamics may push for a more conservative 25-bp approach.
In conclusion, the upcoming Fed decision on the rate cut size is uncertain, with various opinions from different financial institutions. The final decision could impact the economy, interest rates, and financial markets. Stay informed and be prepared for potential market movements based on the Fed's actions.