As expectations regarding the Fed’s interest rate policy reshape themselves in global markets, two major financial institutions have updated their forecasts for the interest rate cut timeline.
TD Securities announced that the Fed has postponed its expectation of its first interest rate cut from March to June. Despite this, the firm maintains its forecast of a total of 75 basis points of interest rate cuts throughout 2026. According to this scenario, the Fed is expected to make three separate 25 basis point cuts in June, September, and December, bringing the policy rate down to 3% by the end of the year.
A team led by Oscar Munoz, Chief US Macro Strategist at TD Securities, stated that the expected interest rate cuts do not stem from a significant deterioration in economic conditions. According to the firm, the easing of monetary policy signifies a “normalization” of policy as inflation gradually approaches the target level. The improvement in the employment outlook will also provide the Fed with more room to focus on combating inflation.
TD Securities also forecasts that US Treasury yields will continue their downward trend throughout the year. Accordingly, the 10-year US Treasury yield is expected to fall to 3.75% by the end of the year. The firm’s previous forecast was 3.5%.
On the other hand, Citigroup also revised its expectations regarding the Fed’s interest rate cut schedule. Citigroup announced that it has moved the date of the first interest rate cut, previously projected for March, to May.
*This is not investment advice.