Standard Chartered is the latest to change its call on what the Fed committee will do next. It joins JPMorgan and Morgan Stanley in forecasting a Fed rate cut this Wednesday.
Standard Chartered Joins Major Banks Predicting Fed Rate Cut
According to a Reuters report, Standard Chartered revised forecasts ahead of this week’s FOMC meeting and is now predicting a 25-basis-point cut in interest rates.
The bank recognized that recent economic data is uncertain. But it believes that cutting interest rates can help as the Fed deals with slowing growth in the U.S. economy.
“We see the case for a December insurance cut, but it is more 60-40 than 95-5 in our view, given how limited and unrevealing post-shutdown data releases have been,” the bank said.
The bank’s odds are lower than many expected, but they are still good enough to change forecasts. The bank also thinks the Federal Reserve will keep interest rates steady through 2026 after finalizing Wednesday’s decision.
Standard Chartered has changed its view to match JPMorgan, Morgan Stanley, and Nomura. These firms initially thought the Federal Reserve would keep interest rates steady, but they have changed their predictions. This shift comes after weak data from November and comments from several high-ranking Fed officials.
Nomura strategists say that there are enough signs for another Fed rate cut to manage risks. However, they believe the December vote will be close. They expect multiple members to disagree with this decision and at least one to argue for a cut of 50 bps.
Nomura also predicts more easing in 2020. They forecast cuts of 25 basis points in June and September next year, especially if a new Fed chair is appointed. Economic adviser Kevin Hassett is reportedly a top candidate to replace Jerome Powell.
What Can Investors Expect on Wednesday’s FOMC Meeting?
That said, markets are preparing for what could be the third Fed rate cut of 2025. Many investors would also like to know the committee’s policy outlook heading into next year.
Yesterday, Hassett told CNBC it would be “irresponsible” for the Fed to pre-commit to a six-month rate path, as policy decisions must be tied to incoming data.
Meanwhile, analysts say that changes in the Federal Reserve’s policies are affecting how money moves in digital assets. Financial analyst André Chalegre noted that the end of the QT has already made financial conditions looser. This shift makes Bitcoin more attractive to institutional investors.
Chalegre however added that a rate cut from the Fed doesn’t necessarily translate into an immediate price move.
To add, the Fed added $13.5 billion to the banking system via overnight repo operations after the official end of QT on December 1.