Bank of America: The Federal Reserve is expected to cut interest rates by 75 basis points in the fourth quarter and another 125 basis points in 2025
According to Mars Finance news, the Federal Reserve announced an oversized 50 basis point rate cut early Thursday morning. Powell stated that this was to demonstrate the policymakers' commitment to maintaining a low unemployment rate after the easing of inflation.
After the Federal Reserve's significant rate cut, Bank of America is the only major Wall Street firm that has raised its forecast for the Federal Reserve's remaining rate cuts in 2024. This Wall Street firm stated that it expects the Federal Reserve to cut rates by 75 basis points in the fourth quarter, compared to its previous forecast of 25 basis point cuts in November and December. According to the Federal Reserve's own policy projections, the federal funds rate will fall another 50 basis points by the end of 2024. Bank of America's economists said that after the larger rate cuts, "we are skeptical that the Fed wants to deliver a hawkish surprise." The firm expects the Federal Reserve to cut rates another 125 basis points in 2025, bringing the federal funds target rate down from the current range of 4.75%-5.00% to a terminal level of 2.75%-3.00%.
