Link Securities | According to a survey of economists conducted by Reuters, the Federal Reserve (Fed) will cut its key interest rate by 25 basis points next week and do so again in December. A month ago, economists expected only one more cut this year. But the new forecast follows a recent shift in the expectations of Fed monetary policy makers, which now point to additional reductions.
In this regard, the agency notes that, caught between the double risk of an even greater increase in inflation, already high due to tariffs, and a further weakening of the labour market, the Fed seems to have prioritised the latter, leading it to cut rates by 25 basis points last month for the first time since December.
All but two economists, 115 out of 117, are betting that the Fed will cut its benchmark interest rate by a quarter of a percentage point on 29 October, to a range of 3.75% to 4.00%. Two economists, meanwhile, expected a 25 basis point cut in October and a 50 basis point cut in December. That majority drops to 71% when it comes to betting on further cuts in official rates in December. The survey was conducted from 15 to 21 October.
For their part, financial market operators are more convinced than the economists surveyed and have fully discounted two more cuts this year in interest rate futures contracts.
