Interest Rate Outlook
While the FED has been holding off on interest rate cuts since January, it now appears that a cut is inevitable.
At this stage, it looks highly likely that the FED will not reduce interest rates at next week’s meeting.
Although it is improbable that interest rates will stay steady, market pricing indicates an 88.1 percent chance for a 25 basis point cut by the FED, while a 50 basis point reduction is estimated at 11.9 percent.
The Fed is anticipated to persist with interest rate cuts moving forward. According to predictions from Wells Fargo, the Fed is expected to lower interest rates five times by June 2026.
Wells Fargo analysts have indicated that they foresee the Fed embarking on a consistent easing cycle, implementing five interest rate reductions by mid-2026.
The bank shared the following insights in a note released on Wednesday:
- We anticipate the Fed to cut the federal funds rate by 25 basis points across its next three meetings, which would adjust the target range to 3.50%-3.75% by the end of the year.
- Further, two more quarter-point cuts are expected during the meetings in March and June next year, bringing the final interest rate to a range of 3.00%-3.25%.
“The U.S. labor market is in a precarious position, in our view, and this is the main reason for our more cautious monetary policy outlook,” stated Wells Fargo analysts, emphasizing that the softer stance on Fed rate cuts is heavily influenced by the declining labor market.
This is not investment advice!
