HSBC has revised forecasts, anticipating that the U S Federal Reserve will implement three interest rate cuts between September 2024 and March 2025. This outlook is driven by ongoing inflation pressures that exceed the Fed’s target of 2

Forecast Timeline for Rate Cuts

HSBC’s predictions include:

• First Cut: A 25-basis-point reduction expected in September 2024.

• Second Cut: Another 25-basis-point cut anticipated in December 2024.

• Third Cut: A final 25-basis-point reduction forecasted for March 2025.

These cuts would see the federal funds rate reduced to a range of 3 50 3 75 by the end of next year.

Underlying Causes for Cuts

• Inflation Pressures Persist: HSBC expects inflation to remain above the Fed’s target throughout this period.

• Labor Market Volatility: Any changes in labor data could necessitate more aggressive policy responses.

• Patient Policy Approach: Fed Chair Jerome Powell emphasized caution in the latest FOMC meeting as they navigate economic uncertainty.

Despite a hawkish tone, HSBC projects that macro pressures and fiscal uncertainties will lead to a more accommodative stance by early 2025.

Market Impact and Outlook for the Dollar

HSBC also noted that forex markets appear influenced more by broader U S trade policies, fiscal debates, and geopolitical tensions than solely by Fed policies, potentially leading to further declines in the U S dollar.

Stay Informed on Economic Indicators

Investors can track economic data that may affect Fed policy by keeping an eye on important releases like CPI labor statistics and GDP figures.