As expectations for the Federal Reserve’s interest rate policy are being reshaped in global markets, two major financial institutions have updated their forecasts for the rate cut schedule.
TD Securities announced that the Federal Reserve has postponed its first rate cut forecast from March to June. Nevertheless, the company maintains its forecast for a total of 75 basis points of rate cuts through 2026. Under this scenario, the Fed would cut rates by 25 basis points in three waves in June, September and December, bringing the policy rate down to 3% by the end of the year.
A team led by Oscar Muñoz, chief U.S. macro strategist at TD Securities, said the expected rate cuts are not due to a significant deterioration in economic conditions. The company said easing monetary policy means that policy will “normalize” as inflation gradually approaches its target level. The improving employment outlook will also give the Fed more room to focus on combating inflation.
TD Securities also predicts that US bond yields will continue to trend downward throughout the year. As a result, the yield on the 10-year U.S. Treasury is expected to fall to 3.75% by the end of the year. The company’s previous forecast was 3.5%.
Meanwhile, Citigroup also revised its expectations for the Fed’s rate cut schedule. Citigroup announced that it has moved its first interest rate cut date, previously expected to be March, to May.
*This is not investment advice.
