On what to expect from the Federal Open Market Committee (FOMC):
- “The long-awaited Fed easing cycle is upon us, but the FOMC will be cautious after the inflation challenges of the past few years. The pace of rate cuts will be gentle and monetary easing won’t do much to boost growth next year”
- We expect 25bp cuts at the September and December meetings and further cuts of 125bp in 2025 and 75bp in 2026.
- These interest rate forecasts represent a much less aggressive easing cycle than most prior Fed easing episodes. There is still work to be done in reducing services inflation and the challenges of the past few years will engender caution at the FOMC.
The assessment from Fitch comes via their latest Global Economic Outlook report.
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There is a test for the Fed coming up later today:
- US CPI preview: Inflation expected to fall to the lowest since 2021
- MUFG expect a higher US dollar if CPI shows an unexpected rise
Fitch Ratings
