As the Fed's new interest rate decision approaches, leading financial institutions, including Ebury, TD Securities, and Bank of America, shared their forecasts.
Ebury Forecast
Ebury, a global financial services firm, expects the Fed to cut interest rates by 25 basis points and suggests further cuts will follow gradually. Matthew Ryan, market strategist at Ebury, said that this cautious approach should provide near-term support for the U.S. dollar. Ryan noted that a 50 basis point rate cut is not on the horizon, adding that the market pricing in a 115 basis point rate cut this year appears overly optimistic. Ebury sees the Fed making three 25 basis point cuts in September, November, and December.
TD Securities Forecast
TD Securities analysts see the possibility of a 25- to 50-basis-point rate cut as imminent, but emphasize the importance of the Fed's upcoming dot plot and Chairman Jerome Powell's press conference. The firm expects the Fed's forward guidance to be dovish, indicating a preference for more gradual easing.
Bank of America Forecast
Similarly, economists at Bank of America (BofA) expect a dovish stance from the Fed. In a report addressing client concerns, they noted that the Fed typically avoids making hawkish moves without sufficient warning. 'The Fed appears more willing to surprise on a modest note,' BofA said, reinforcing its view that the upcoming rate cuts are likely to be measured and cautious. The bank also believes that this dovish bias will support longer-term bonds and lead to a steepening yield curve.
According to data from the Chicago Mercantile Exchange (CME), the market currently gives a 55% probability of a 50 basis point rate cut and a 45% probability of a more moderate 25 basis point cut.
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