JPMorgan forecasts that the Federal Reserve may cut interest rates by 50 basis points in November

JPMorgan anticipates that the Federal Reserve may implement another significant rate cut in November, potentially reducing rates by 50 basis points. The bank, which had predicted a half-point cut this week, believes that further rate cuts are likely if the labor market shows signs of weakness. While some other Wall Street firms have adjusted their forecasts, JPMorgan remains confident in its prediction, provided that labor data supports this outlook.

JPMorgan Leads Rate Cut Predictions Amid Employment Market Uncertainty

Financial giant JPMorgan is forecasting another significant rate cut this year, a prediction based on its earlier expectation of the Federal Reserve's recent half-point rate reduction on Wednesday.

Michael Feroli, the bank's Chief U.S. Economist, reiterated his outlook for a potential 50 basis point cut in November, noting that this prediction hinges on the upcoming employment report. Feroli has maintained his forecast for Wednesday's cut since August, even as others adjusted their predictions. JPMorgan's rate strategists expect bond yields to remain stable until the September employment report provides further guidance.

“We still expect the pace of rate normalization to be faster than the median projection,” Feroli wrote in a client note following the Fed's decision. He emphasized that the timing of the next rate cut depends on the extent of weakness in the employment data.

“Our expectation for a 50 basis point cut at the next meeting in early November is contingent upon further weakness in the two employment reports during this period.”

“More subdued employment data would instead support a moderate scenario where the Federal Open Market Committee (FOMC) cuts rates by 25 basis points at each remaining meeting this year,” the economist added.

Other economists’ predictions

The Fed remains dedicated to a gradual approach. Future rate cuts at upcoming meetings are expected to be limited to a quarter-point each, unless the economic situation deteriorates significantly. The Fed’s “Summary of Economic Projections [PDF],” released alongside the policy meeting, suggests that a repeat of September's substantial cut is unlikely. Members of the Fed's policy-making committee indicated that most anticipate only quarter-point cuts at one or both of the next two meetings, scheduled for November 7 and December 18.

Despite JPMorgan's firm stance, other Wall Street firms have adjusted their predictions. Economists at Citigroup have abandoned their forecast for a half-point cut ahead of this week’s meeting. Meanwhile, Goldman Sachs, led by Jan Hatzius, expects a series of rate cuts extending into mid-2025, noting that the decision in November is "difficult to predict" and will depend on employment data.

On Thursday, bond yields fell, with the two-year yield dropping 4 basis points to 3.58%, and the ten-year yield decreasing by 1 basis point to 3.69%. Traders are anticipating further rate cuts from the Federal Reserve later this year.

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