Federal Reserve Cuts Rates by 50 bps, More Cuts Expected: Citi Analysts
In a recent update, Citi analysts have maintained their prediction of a 50 basis point cut by the Federal Reserve in November. This decision comes after the central bank already made a similar rate cut, marking its first since 2020.
The Fed reduced rates by 50 bps to a range of 4.75% to 5%, with indications pointing towards more cuts in the future. The central bank believes that the risks surrounding inflation and the labor market are now more balanced.
Fed Chair Jerome Powell expressed confidence in the easing of inflation in the upcoming months. Citi mentioned that the recent rate cut reflects the Fed's shift towards addressing labor market weaknesses rather than focusing solely on inflation risks.
Looking ahead, Citi expects the Fed to cut rates by another 50 bps in November, followed by a 25 bps cut to close out the year. This would bring the total rate reductions for 2024 to 125 bps.
According to Citi analysts, Powell's emphasis on staying ahead of the curve suggests that further significant rate cuts are likely. They believe that any signs of weakness in the labor market will prompt more dovish actions from the Fed.
Despite this, Powell has made it clear that the Fed is not considering a return to ultra-low rates and sees a higher neutral rate compared to previous periods.
In conclusion, investors should be prepared for potential market fluctuations due to the Fed's rate cuts. It is important to stay informed and adapt investment strategies accordingly to navigate the evolving financial landscape.