Brokerages Anticipate a 25 Basis Point Rate Cut from the Fed in December

Leading financial institutions such as J.P. Morgan, Barclays, and Goldman Sachs maintain their expectations that the U.S. Federal Reserve (Fed) will implement a 25 basis point interest rate cut in December. This consensus follows a similar rate reduction during the Fed's meeting on November 6-7.

The Federal Reserve is currently assessing potential changes in the economic landscape due to Donald Trump's upcoming presidency. Fed Chair Jerome Powell stated that the central bank will evaluate the impact of the new administration's policies on its goals of stable inflation and maximum employment.

While the majority of major brokerage firms agree with the 25 basis point cut forecast, Citigroup stands out with an expectation of a 50 basis point reduction.

Forecasts for the Fed Funds Rate by the end of 2025 vary among these institutions. BofA Global Research predicts a rate of 3.0%-3.25%, while Deutsche Bank expects 3.25%-3.50%, and Barclays forecasts a higher range of 3.75%-4.00%. Other predictions include both Macquarie and Goldman Sachs projecting a rate of 3.25%-3.50% until June 2025, and UBS Global Research estimating 3.0%-3.25% by the end of 2025. Specifically, Morgan Stanley (NYSE: MS) forecasts a rate of 3.375% for the fourth quarter of 2025.

Ahead of the November policy meeting, forecasts for interest rate cuts in November and December were consistent at 25 basis points among all brokerage firms, except for UBS Global Wealth Management, which anticipates a 50 basis point reduction for December.

It is important to note that UBS Global Research and UBS Global Wealth Management operate as separate, independent divisions within the UBS Group.