🧐 ProPicks AI October update is out now! See which stocks made the listPick Stocks with AI

Fed unlikely to commit beyond the initial 25bp rate cut in September: HSBC

Published 09/12/2024, 06:43 AM
Updated 09/12/2024, 07:28 AM
© Reuters
US500
-

Investing.com -- The Federal Reserve is expected to initiate its first rate cut in over a year at its September meeting, but HSBC analysts said in a note Thursday that they believe the central bank will proceed cautiously with no firm commitment to further cuts in the near term.

HSBC anticipates a 25-basis point (bp) reduction in the federal funds target range, lowering it from 5.25%-5.50% to 5.00%-5.25%.

"We expect the FOMC's median projection for the federal funds target range at end-2024 to fall to 4.50-4.75% (from 5.00-5.25% previously), consistent with our forecast of 25bp rate cuts in September, November, and December," HSBC wrote.

However, they also said the Federal Open Market Committee (FOMC) is unlikely to commit beyond the initial 25bp cut at this stage.

The firm explained that while recent inflation data came in slightly higher than expected, the wider economic outlook supports the case for a gradual approach.

"The latest inflation data came in a bit higher than we had anticipated, providing FOMC policymakers with another reason to start with a smaller initial rate cut of 25bp, rather than a larger 50bp move," HSBC stated.

In addition, the bank does not expect significant revisions to the Fed's economic projections in the upcoming quarterly report.

They explained that they expect the FOMC's year-end 2024 median projection for the federal funds rate to drop to 4.50%-4.75%, consistent with their forecast of incremental rate cuts.

Fed Chair Jerome Powell is expected to take a cautious tone in his press conference, stating that future policy decisions will be made "meeting by meeting" while monitoring economic data.

HSBC also expects Powell to highlight the Fed's dual mandate of reducing inflation to 2% while maintaining a strong labor market.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.