JPMorgan Chase US chief economist Michael Feroli said he expects the Fed to cut interest rates by 25 basis points next week.
Feroli noted that some members wanted a larger rate cut, but none favored leaving rates unchanged. He also noted that the Fed’s dot plot projections are expected to project another rate cut after 2025.
Meanwhile, the probability of a US government shutdown this year has risen to 54%, the highest in months, according to data from prediction market Kalshi. Senate Majority Leader Chuck Schumer has warned that Democrats are prepared to deplete government funds if Republicans refuse to accept demands for health care spending.
Meanwhile, TD Securities strategists argued in a note that the dollar could appreciate in the short term if the Fed cuts interest rates by 25 basis points but delivers cautious forward-looking messages. The strategists noted that markets are pricing in successive rate cuts, but the Fed could limit these expectations by highlighting inflation risks. It was noted that Fed Chair Jerome Powell is likely to emphasize that the rate cuts are not tied to a predetermined path and that data will be closely monitored.
*This is not investment advice.