BofA only top brokerage to raise forecast for Fed's 2024 rate cuts
Corrects paragraph 2 to say BofA expects 75 bps in cumulative rate cuts from the Fed in Q4, not a single rate cut; fixes typographical error in paragraph 7
By Kanchana Chakravarty
Sept 19 (Reuters) -BofA Global Research was the only major brokerage to raise its forecast for the Federal Reserve's anticipated interest-rate cuts for the rest of 2024, a day after the U.S. central bank delivered an outsized cut.
The Wall Street brokerage said it expects rate reductions totaling 75 basis points in the fourth quarter, compared with its earlier forecast for two 25-bp cuts in the Fed's November and December meetings.
Fed policymakers themselves have projected the benchmark interest rate will fall by another half a percentage point by 2024-end.
The central bank announced a larger-than-usual 50 bps reduction on Wednesday that Chair Jerome Powell said was meant to show policymakers' commitment to sustaining a low unemployment rate now that inflation has eased.
Following the bigger rate cut, "we are skeptical that the Fed will want to deliver a hawkish surprise", BofA economists said.
The brokerage expects another 125 bps of cuts in 2025 to bring the terminal rate to 2.75%-3.00%, from the current federal funds target rate of 4.75%-5.00%.
That compares with Fed policymakers projecting a full percentage point in cutsfor next year, and half a percentage point for 2026, while cautioning the outlook that far into the future is necessarily uncertain.
Goldman Sachs, meanwhile, retained its forecast of two 25- bp cuts in the November and December meetings this year, but said it now expects consecutive 25 bps cuts from November 2024 through June 2025, bringing the terminal rate to 3.25%-3.50% by mid-2025.
It earlier expected quarterly pacing of cuts in 2025.
Citigroup maintained its expected size of cuts this year at 125 bps, but now expects a 25 bps reduction in December against its earlier forecast of a 50 bps cut.
Other brokerages like Macquarie and Deutsche Bank have retained their calls of two 25 bps rate cuts this year.
Reporting by Kanchana Chakravarty in Bengaluru; Editing by Rashmi Aich and Devika Syamnath
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