JPMorgan, Morgan Stanley Join Standard Chartered in Betting on Fed Rate Cuts

Wall Street giants are placing their chips on the same side of the table. JPMorgan and Morgan Stanley have now aligned their forecasts with Standard Chartered, all pointing toward Federal Reserve rate cuts in the coming months.

The Consensus Shift

It's not just a whisper in the halls of finance anymore. The expectation of easing monetary policy is moving from fringe prediction to mainstream consensus. When banks of this magnitude start singing the same tune, markets listen.

What This Means for Markets

Lower interest rates traditionally send investors searching for yield beyond traditional bonds. This environment has historically been rocket fuel for risk assets. It creates a gravitational pull of capital toward growth-oriented investments, a dynamic digital asset markets know well.

The Finance World's Favorite Game

Predicting the Fed's next move remains the ultimate parlor game for economists—a pastime only slightly less speculative than some of the assets that stand to benefit from their calls. The real question isn't if they'll cut, but how quickly the dominoes fall once they do.

TLDR

• Standard Chartered has revised its forecast, predicting a 25-basis-point Fed rate cut this Wednesday.
• The bank joins JPMorgan and Morgan Stanley, which also expect a rate reduction in the upcoming FOMC meeting.
• Standard Chartered cited mixed economic data as a key factor in its decision to forecast a rate cut.
• The bank sees a 60-40 chance for a December rate cut, emphasizing uncertainty in the U.S. economy.
• Nomura also expects the Fed to cut rates, but foresees a close vote with some members opposing the move.

Standard Chartered has revised its forecast for the Federal Reserve‘s next move, now predicting a 25-basis-point rate cut this Wednesday. The bank follows JPMorgan and Morgan Stanley, which also anticipate a reduction in interest rates. Standard Chartered’s shift comes ahead of the Federal Open Market Committee (FOMC) meeting, where the decision will be made.

The bank emphasized uncertainty in the U.S. economy, pointing to mixed economic data as a key factor in its decision. Despite this, it believes a rate cut is necessary to address slowing growth. “We see the case for a December insurance cut, but it is more 60-40 than 95-5 in our view,” the bank stated. This indicates the bank sees the likelihood of a rate cut as more probable but not certain.

JPMorgan and Morgan Stanley Align with Standard Chartered on Fed Rate Cut

JPMorgan and Morgan Stanley have also updated their forecasts, now expecting a 25-basis-point Fed rate cut. These predictions mark a departure from their initial stance that the Fed WOULD keep rates steady. Weak data from November and recent comments from Fed officials have contributed to this change in outlook.

The revised forecasts align with Standard Chartered’s prediction, reflecting broader market expectations. However, Nomura, another major bank, maintains that the December vote could be close. Nomura strategists anticipate that some Fed members will argue against a rate cut, with at least one suggesting a 50-basis-point reduction.

Nomura further expects the Fed to continue easing next year, predicting additional rate cuts in June and September. These cuts would likely depend on whether a new Fed chair is appointed, with Kevin Hassett considered a possible replacement for Jerome Powell.

Markets Prepare for Third Fed Rate Cut of 2025

Markets are gearing up for what could be the third Fed rate cut in 2025. Many investors are closely monitoring the Fed’s policy outlook as it heads into the new year. The ongoing uncertainty surrounding the U.S. economy and global financial conditions continues to drive speculation about the Fed’s next steps.

Kevin Hassett, an economic advisor, commented on the need for flexibility in the Fed’s approach. He stated that it would be “irresponsible” for the Fed to pre-commit to a set path for rate changes, stressing the importance of adapting to incoming data. The ongoing adjustments in Fed policies are influencing money flows into digital assets, with Bitcoin becoming more appealing to institutional investors.

Following the end of quantitative tightening (QT) on December 1, the Fed has already added $13.5 billion to the banking system via overnight repo operations. This MOVE is seen as another indication of looser financial conditions, which may also contribute to Bitcoin’s growing appeal among institutional investors. However, analysts caution that a Fed rate cut does not always lead to an immediate price movement in digital assets.