BofA Global Research Raises Forecast for Fed’s Interest Rate Cuts
In a move that has sent shockwaves through the financial world, BofA Global Research has raised its forecast for the Federal Reserve’s anticipated interest rate cuts for the remainder of this year. This decision comes on the heels of the U.S. central bank kicking off a widely expected series of reductions on Wednesday, demonstrating their commitment to sustaining a low unemployment rate in light of easing inflation.
The Fed’s announcement of a larger-than-usual half-percentage-point reduction has set the stage for a potentially more aggressive approach to monetary policy. BofA Global Research now expects the Fed to lower rates by a total of 75 basis points in the fourth quarter, a significant increase from their earlier forecast of two 25-basis-point cuts in the November and December meetings.
Looking ahead, BofA Global Research anticipates another 125 basis points of cuts in 2025, bringing the terminal rate to 2.75%-3.00%. This shift in forecast reflects the belief that the Fed may be pushed into deeper cuts in the coming years.
Goldman Sachs, on the other hand, has retained its forecast of two 25-basis-point cuts in the November and December meetings this year. However, they now expect consecutive 25-basis-point cuts from November 2024 through June 2025, bringing the terminal rate to 3.25%-3.50% by mid-2025. This change in forecast is based on the greater urgency implied by the recent 50-basis-point cut and the acceleration in the pace of cuts expected in the years to come.
Fed policymakers have projected a gradual decline in the benchmark interest rate, with expectations of a half a percentage point cut by the end of 2024, a full percentage point decrease next year, and another half percentage point reduction in 2026. While the outlook for the future is uncertain, these projections provide valuable insights into the Fed’s approach to monetary policy in the years ahead.
In conclusion, the decisions made by the Federal Reserve regarding interest rate cuts have far-reaching implications for the economy, financial markets, and individual investors. Understanding these forecasts and their potential impact is crucial for anyone looking to navigate the complex world of finance and make informed decisions about their financial future. Stay tuned for further updates on this evolving situation as we continue to monitor the latest developments in the world of finance.