Askume, Sep 19 – A day after the Federal Reserve cut interest rates, Bank of America Global Research was the only major brokerage to raise its forecast for rate cuts by the Federal Reserve for the remainder of 2024.
The Wall Street brokerage said it expects a total of 75 basis points of interest rate cuts in the fourth quarter, following expectations for two 25 basis point cuts by the Federal Reserve at its November and December meetings.
Fed policymakers themselves expect the benchmark rate to drop by half a percentage point by the end of 2024.
The central bank on Wednesday cut interest rates by a modest 50 basis points , with Chairman Jerome Powell saying the measure was intended to reflect policymakers’ commitment to keeping inflation low while also keeping unemployment low.
After the sharp rate cut, “we remain skeptical that the Fed will take any more aggressive steps,” Bank of America economists said.
The brokerage estimates that the final interest rate will drop by 125 basis points to 2.75%-3.00% in 2025, while the current federal funds target rate is 4.75%-5.00%.
This coincides with Fed policymakers forecasting rate cuts of a full percentage point next year and a half percentage point by 2026, while cautioning that prospects for the distant future are necessarily uncertain.
Meanwhile, Goldman Sachs maintained its forecast of two 25 basis point rate cuts at its November and December meetings this year, but said it now expects consecutive 25 basis point rate cuts from November 2024 to June 2025, bringing the final rate to 2025. Goldman Sachs expects to reach 3.25% and -3.50% by mid-2017.
A quarterly reduction was previously expected in 2025.
Citigroup maintains its expectation for a 125 basis point rate cut this year but now expects a 25 basis point cut in December, down from a previous forecast of 50 basis points.
Other brokerages, including Macquarie and Deutsche Bank, have maintained their stance on cutting interest rates by 25 basis points twice this year.
(This report has been revised to read that Bank of America expects the Fed to cut interest rates by a cumulative 75 basis points in the fourth quarter, rather than a single rate cut as reported in paragraph 2. A spelling error in paragraph 7 has been corrected.)
