BofA Global Research is the only major brokerage firm to revise its prediction for the Federal Reserve’s upcoming interest-rate reductions for the remainder of 2024, in the wake of a significant cut by the U.S. central bank.
The Wall Street firm now anticipates a total of 75 basis points in rate cuts during the final quarter of the year, in contrast to its previous forecast of two 25-bp cuts during the November and December Fed meetings. In comparison, Fed policymakers have projected a further 0.5 percentage point decrease in the benchmark interest rate by the conclusion of 2024.
The recent announcement by the central bank revealed an unusually substantial 50 bps reduction on Wednesday, as Chair Jerome Powell emphasized the policymakers’ dedication to maintaining a low unemployment rate amid a decrease in inflation.
Following this sizable rate cut, BofA economists expressed skepticism about the likelihood of the Fed implementing a more aggressive monetary policy stance. Looking ahead to 2025, the brokerage anticipates an additional 125 bps reduction to establish a terminal rate range of 2.75%-3.00%, deviating from the current federal funds target rate of 4.75%-5.00%.
Contrastingly, Goldman Sachs has maintained its forecast of two 25-bp cuts during the November and December meetings of this year, but has adjusted its projection to predict consecutive 25 bps reductions from November 2024 through June 2025. This adjustment is expected to bring the terminal rate to 3.25%-3.50% by the middle of 2025. Earlier estimates by Goldman Sachs suggested a quarterly pace of cuts for 2025.
On the other hand, Citigroup has retained its expected size of cuts for this year at 125 bps but now foresees a 25 bps decrease in December, compared to its initial forecast of a 50 bps cut. Meanwhile, Wells Fargo expects a 75 bps cut in the final quarter of this year and a full percent cut in 2025. Other brokerage firms such as Macquarie and Deutsche Bank have maintained their predictions of two 25 bps rate cuts for the current year.
