DBS Bank: Pricing in the Fed’s aggressive rate cuts could lead to disappointment and panic
DBS Bank stated that the market expects the Federal Reserve to implement a series of rate cuts, but the aggressive market pricing may be disappointed and ultimately trigger panic. Economist Taimur Baig wrote in a report that "an inflation rate below 3% and a policy rate above 5% are often difficult to coexist, so some monetary easing is necessary. However, the market's reflection of the extent of rate cuts seems excessive. For the yield curve to reflect a rate cut of more than 200 basis points over the next 16 months, the US economy must clearly weaken, and inflation must fall below 2%, which is unlikely to happen." DBS Bank's basic view is that by the end of 2025, the Federal Reserve will cut rates by 150 basis points, and this week it will cut rates by 25 basis points.
