JPMorgan Chase, Bank of America Forecast New Rate Cut in November As Fed President Says Soft Landing Likely: Report

Two of the largest banks in the US believe another rate cut from the Federal Reserve is incoming.

The Fed started its rate-cutting cycle last month, announcing a 50 bps reduction in interest rates amid concerns about the health of the US economy.

Now, analysts at JPMorgan Chase and Bank of America (BofA) think the Fed will take a more moderate approach moving forward, forecasting a 25 bps rate cut in November, reports Bloomberg.

According to the market strategists, the US is flashing signs of resilience following reports that nonfarm employment grew by 254,000 in September.

JPMorgan chief US economist Michael Feroli says the strength in the labor market should “make the Fed’s job easier.” He also says the central bank will likely take a “path of gradual rate normalization” unless a “rather large” surprise comes up in the November jobs report.

Meanwhile, BofA economist Aditya Bhave says another 50 bps rate cut is no longer necessary amid the strong labor market data.

“The risks to this figure are to the upside, given the string of data pointing to stronger productivity growth.”

The analysts’ predictions come as New York Fed President John Williams reportedly says the US economy is now “well-positioned” to carry out a soft landing. Williams points to a growing labor market and declining inflation as indicators of a robust economy, reports the Financial Times.

“The current stance of monetary policy is really well positioned to both hopefully keep maintaining the strength that we have in the economy and the labour market, but also continuing to see that inflation comes back to 2%.” 

Earlier this week, the Bureau of Labor Statistics (BLS) reported that the Consumer Price Index (CPI) rose 2.4% in the last 12 months, the smallest increase since February 2021.

While Williams believes the 50 bps rate reduction was “right in September” and “right today,” he thinks the Fed’s dot plot offers a “very good base case” for upcoming rate cuts. The Fed’s dot plot suggests a 25 bps rate cut each during the November and December meetings.

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