JPMorgan flips forecast, sees Fed cutting rates in December

[NEW YORK] Economists at JPMorgan Chase see the US Federal Reserve cutting interest rates next month, a reversal of the bank’s briefly held view that policymakers would delay reducing borrowing costs until January.

A team led by Chief US Economist Michael Feroli said on Wednesday (Nov 26) that commentary supporting a near-term cut from key Fed officials – notably the president of the Federal Reserve Bank of New York, John Williams – has pushed them to reconsider.

Wall Street’s largest bank had previously forecast a hold after the publication of the delayed September jobs report last week.

The Federal Open Market Committee (FOMC), led by Chair Jerome Powell, meets in Washington on Dec 9 and Dec 10. JPMorgan forecasts the Fed will carry out two, quarter-point cuts next month and in January.

“We are back to looking for a final cut in January,” Feroli wrote in a note to clients. “While the next FOMC meeting remains a close call, we now believe the latest round of Fedspeak tilts the odds towards the Committee deciding to cut rates in two weeks from today.”

JPMorgan’s refreshed view aligns with the market perspective of swap traders, who are presently pricing a roughly 80 per cent chance that the Fed will ease policy by a quarter-point next week. That’s up from less than 30 per cent a week ago, after the publication of the September labour data but before Williams’ comments. BLOOMBERG