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Two major American banks, JPMorgan Chase and Bank of America (BofA), believe that the Federal Reserve will continue to reduce interest rates. This process began last month when the Fed lowered interest rates by 50 basis points due to concerns about the health of the U.S. economy.
Expectations for Fed’s Interest Rate Cuts
Analysts from JPMorgan Chase and BofA predict that the Fed will adopt a more moderate stance in upcoming meetings. According to Bloomberg, a 25 basis point rate cut is expected in November.
Strong Labor Market
Market strategists view the increase of 254,000 in non-farm employment in September as a sign of resilience in the U.S. economy. JPMorgan’s chief economist, Michael Feroli, states that a strong labor market should ease the Fed’s job.
Economic Outlook
BofA economist Aditya Bhave asserts that another 50 basis point cut is no longer necessary in light of strong labor data. New York Fed President John Williams adds that the U.S. economy is poised for a soft landing.
Michael Feroli: “The strength in the labor market should make the Fed’s job easier.”
Aditya Bhave: “A strong labor market indicates that another major rate cut is unnecessary.”
John Williams: “The current stance of monetary policy is well-positioned to keep the economy and labor market strong.”
These developments indicate that the Fed is gradually normalizing its interest rate policies. September’s CPI data, showing a 2.4% increase, marks the lowest rise. The Fed’s dot plot anticipates rate cuts of 25 basis points in both November and December meetings.
Finally, strong economic data and the labor market support the Fed’s careful and gradual approach to interest rate policies. Market participants will closely monitor the impact of upcoming rate cuts on economic growth and inflation.
