Brokerages maintain forecast of Fed rate cuts starting June

Fed rate cut hopes: Following the Federal Reserve's decision to keep interest rates unchanged at its March 19-20 meeting and maintain its projection of three cuts this year, most major brokerages are standing by their expectations that the Fed will commence lowering interest rates starting June.

Fed Chair Jerome Powell reiterated that recent inflation readings have not altered the underlying narrative of gradually easing price pressures and affirmed expectations of continued robust economic growth.

Market sentiment remains aligned with the anticipation of rate cuts commencing in June, a sentiment echoed by top Wall Street banks.

Currently, investors are pricing in approximately a 70 per cent likelihood of a 25-basis-points cut in June, slightly up from 67 per cent before the Fed's decision, according to the CME's FedWatch tool.

Brokerages such as Goldman Sachs, J.P. Morgan, BofA Global Research, and Deutsche Bank have maintained their forecasts regarding the future trajectory of interest rates. UBS Global Research, however, revised its forecast for the first rate cut to June from May.

The latest forecasts from major brokerages following the March meeting are as follows:

Goldman Sachs expects first cut to occur in June, with a total of three cuts amounting to 75 basis points in 2024, and projects the Fed funds target rate to stand at 4.625 per cent by the end of 2024.

J.P. Morgan also predicts the first cut in June, with three cuts totalling 75 basis points, and a projected Fed funds target rate ranging from 4.50 per cent to 4.75 per cent by the end of 2024.

BofA Global Research aligns with the June forecast for the first cut, projecting three cuts in total.

Deutsche Bank expects the first cut in June, with a total of three cuts amounting to 100 basis points, and anticipates the Fed funds target rate to range between 4.25 per cent and 4.50 per cent by the end of 2024.

UBS Global Wealth Management and UBS Global Research both anticipate the first cut to occur in June, with three cuts totalling 75 basis points, and project the Fed funds target rate to range from 4.50 per cent to 4.75 per cent by the end of 2024.

Notably, Morgan Stanley predicts the first cut in June, with a total of four cuts totalling 100 basis points, and anticipates the Fed funds target rate to stand at 4.38 per cent by the end of 2024.

(With Reuters inputs)