Top U.S. Banks Expect Another Rate Cut by the End of the Year

Analysts from two of the largest U.S. banks foresee an imminent interest rate cut from the Federal Reserve.

Following a 50 basis point reduction last month, the Fed is expected to adopt a more measured strategy, with projections for a 25 basis point cut in November.

JPMorgan Chase and Bank of America attribute this forecast to recent signs of economic resilience, including a notable increase of 254,000 in nonfarm employment for September.

Michael Feroli, chief economist at JPMorgan, believes the robust labor market will facilitate the Fed’s decision-making process, suggesting a gradual normalization of rates unless unexpected data emerges in the upcoming jobs report.

BofA’s Aditya Bhave stated that a further 50 basis point cut seems excessive given the strong labor statistics. This sentiment is echoed by New York Fed President John Williams, who considers the U.S. economy well-suited for a soft landing, highlighting the positive trends in employment and declining inflation.

The Bureau of Labor Statistics recently reported a 2.4% rise in the Consumer Price Index over the past year, the smallest gain since February 2021. While Williams supported the September rate cut, he sees the Fed’s dot plot as a reliable guide for future cuts, indicating potential 25 basis point reductions in November and December.