Mini Program: Daily summary of investment bank/institutional views
1. JPMorgan: Still expects the Fed to cut interest rates by 50 basis points next week
JPMorgan Chase is sticking with its forecast that the Fed will cut interest rates by 50 basis points next week. The bank said the CPI report may tilt some FOMC members toward a 25 basis point rate cut, but they still see a compelling case for a 50 basis point rate hike as the focus now shifts to the weakness in the labor market. However, JPMorgan Asset Management believes the Fed will cut interest rates by 25 basis points next week. The agency said inflation has now cooled and there really is no serious inflation problem. The CPI data does not require drastic action from the Fed and it is good to see a 25 basis point rate cut next week.
2. Goldman Sachs: It is currently speculated that the Fed will cut interest rates by 25 basis points for the first time, and it is expected to see two or even three rate cuts
Goldman Sachs CEO Solomon said that as autumn arrives, we expect to see two, possibly three, Fed rate cuts. The bank's outlook is slightly weaker, and he still believes that a soft landing is the most likely outcome. The current speculation is that the Fed will cut interest rates by 25 basis points for the first time, but 50 basis points is still possible.
3. Citigroup: Lowers bet on Fed rate cuts, expects 25 basis points cut in September
Citi economists abandoned their forecast for a 50 basis point rate cut at next week's meeting, instead predicting a 25 basis point cut, while maintaining their expectations for a total rate cut of 125 basis points this year. Wednesday's August CPI data "may only be enough to convince the FOMC to cut rates by 25 basis points, rather than 50 basis points, at next week's meeting," economist Andrew Hollenhorst wrote in a note. However, the labor market "will remain the top concern for policymakers," and we still expect a 125 basis point rate cut this year, with 50 basis point cuts in November and December. Citi had previously predicted 50 basis point cuts in September and November, and a 25 basis point cut in December.
4. Morgan Stanley: CPI data has met the expectation of a 25 basis point interest rate cut
Chris Larkin of Morgan Stanley E*Trade said that the market generally expects the Fed to cut interest rates by 25 percentage points next week, and today's CPI data was more or less in line with the target, in line with expectations of a 25 basis point rate cut. Investors who hoped for a larger rate cut may be disappointed, but as inflation appears to be under control, the market may turn its attention back to economic growth, especially employment.
5. Deutsche Bank: The Federal Reserve is expected to cut interest rates six times by September next year
Stefanie Holtze-Jen, chief investment officer for Asia Pacific at Deutsche Bank's private banking unit in Singapore, said the Federal Reserve is likely to start a rate-cutting cycle next week, predicting a total of six cuts in the year to September 2025, fewer than the roughly nine cuts traders are pricing in. In addition, the European lender warned that mispricing the prospect of Fed rate cuts could trigger a bout of market volatility.
6. Wells Fargo: Stick to the expectation of a 50 basis point rate cut by the Federal Reserve
"The August jobs report does little to resolve the debate over whether a 25bp or 50bp cut will occur this month," Wells Fargo economists wrote in a recent note. "We stick with our 50bp cut forecast but acknowledge the real possibility of a 25bp cut." Fed funds futures moved both ways on Friday as markets were confused about how to interpret comments made by Fed Governor Waller following the data release. Traders briefly saw a 79% chance of a 50bp cut in September, but then switched to a 71% chance of a conventional 25bp cut.
7. Capital Economics: The cooling of US inflation is not enough to support the Fed's 50 basis point rate cut
Paul Ashworth, an economist at Capital Economics, said in a note that CPI inflation in August "appears to be consistent with the Fed's preferred measure of PCE inflation being just below target." He said the monthly CPI was 0.2%, which means the monthly increase in PCE was 0.15%. August PCE data will be released later this month after the Fed cuts interest rates next week. "Overall, we still believe that the Fed will start the rate cut cycle with a more moderate pace," that is, a first cut of 25 basis points, he said. He added that the 3.2% core CPI annual rate was mainly due to a 5.2% increase in housing prices, while the three-month core CPI annual rate "rebounded only to 2.1% from a weak 1.6%."
8. Barclays: Despite weak economic growth, the Bank of England will not be forced to cut interest rates in September
Barclays economists Jack Meaning and Abbas Khan noted that the weak performance of the British economy, which failed to expand in July, may attract the attention of Bank of England policymakers, which may consolidate confidence that they were right to launch an easing cycle in August and further rate cuts are needed in the coming months. However, the economists said in a report that the flat economic growth in July was not enough to force the Bank of England to cut interest rates by 25 basis points at its meeting this month. They added that the UK's economic growth in the third quarter of 2024 is likely to remain positive, but slow from the highs in the first half of this year. Barclays' quarterly forecast for the UK economy in the third quarter is 0.4%, the same as the Bank of England's forecast.
9. Bank of America: ECB rate cuts may continue until 2026
Evelyn Herrmann, European economist at Bank of America Global Research, said that as inflation continues to be lower than expected, we expect the ECB's rate cuts may continue until 2026. Bank of America expects the ECB to cut its deposit rate by 25 basis points on Thursday while keeping its guidance unchanged, followed by another 25 basis point cut in December and five more cuts in 2025.
10. Rabobank: The euro still has room to fall against the pound in the coming months
Rabobank said the euro may face greater obstacles than the pound, which could cause the euro/pound exchange rate to fall below the key level of 0.84 in the coming months from the current 0.8446. Jane Foley, a foreign exchange strategist at Rabobank, said in a report that the pound will face headwinds due to the tough budget plan expected to be unveiled by the United Kingdom on October 30 and the possibility of another rate cut by the Bank of England this year. However, she said the euro may also face two rate cuts from the European Central Bank this year, as well as some uneasy budget negotiations, especially in France. In addition, "there is a risk that Germany will fall back into a technical recession," Foley said. Despite the recent decline in euro/pound, it is still well above the average exchange rate of 0.7840 since the birth of the euro.
11. HSBC: No matter what supply measures OPEC+ takes, it is likely to hurt oil prices
HSBC said that whether OPEC+ relaxes voluntary supply restrictions in the coming months is likely to hurt oil prices. If OPEC+ cancels its production cuts, it could lead to a return to a large supply surplus in 2025; on the other hand, while maintaining production cuts may help prices rise at first, the move may also be seen as an "implicit recognition" of weak global demand growth.
The article is forwarded from: Jinshi Data
