From Hold to Cut, JP Morgan Now Confident Fed Will Move in December
JP Morgan has changed its view on the Federal Reserve's interest rate policy and now predicts a 25 basis point rate cut at its December meeting. Previously, the investment giant had expected the Fed to move in January and hold rates until the end of the year. This revised projection marks a significant shift in attitude among major Wall Street players regarding the near-term direction of US monetary policy.
JP Morgan's change in outlook was triggered by a series of comments from key Fed officials, including New York Fed President and FOMC Vice Chairman John Williams. The tone of their statements is seen as signaling that the central bank is opening the door to a faster rate cut. At the same time, Goldman Sachs, in a separate note, stated that the September jobs report was likely strong enough to "lock in" a 25 basis point cut at the December 9-10 FOMC meeting, especially since there are no other major data releases before that date.
In his research note, Michael Feroli, Chief US Economist at JP Morgan, stated that the next FOMC meeting is still considered a "close call," but the latest wave of comments from Fed officials (Fedspeak) now points more toward the Committee cutting interest rates in the next two weeks. This means the risk of a decision tilting toward a cut, rather than simply holding rates. However, he emphasized that after this move, JP Morgan still expects one final rate cut in January.
From a market perspective, financial players are also moving in line with this narrative. According to the CME FedWatch tool, traders now project a nearly 85% chance of a quarter-point rate cut in December, a significant increase compared to previous weeks. This expectation reinforces the view that the Fed's monetary easing cycle is not yet complete, and the market is beginning to adjust positions in bonds, the US dollar, and commodities like gold and silver.
Interestingly, earlier this month, JP Morgan withdrew its December rate cut projection after the September employment report, delayed by the US government shutdown, made the data signal less clear. Now, with more dovish comments from Fed officials and the absence of any major data before the FOMC, the bank is returning to a December cut scenario. For market participants, this shift in JP Morgan's stance is further confirmation that the overarching theme heading into the end of the year is "the Fed is getting closer to a cut," and that could continue to shape the direction of the dollar, the stock market, and safe-haven assets in the near term.
Source: Newsmaker.id
