Fed's Potential December Surprise: Interest Rate Cut Anticipated

Key global brokerages, including Nomura and Standard Chartered, now anticipate a U.S. Federal Reserve interest rate cut in December. This shift in expectation follows dovish Fed signals and softer November data. A contentious decision, some anticipate hawkish and dovish dissents among Fed members, with potential changes in leadership adding uncertainty.

In a reversal of previous forecasts, major global brokerages such as Nomura and Standard Chartered now anticipate a U.S. Federal Reserve interest rate cut this December. Their predictions come amid dovish signals from Federal Reserve officials and softer-than-expected data for November.

Top institutions like J.P. Morgan and Morgan Stanley have also shifted their stance, now expecting a reduction in borrowing costs. Notable Fed officials, including New York Fed President John Williams and San Francisco Fed President Mary Daly, contributed to this renewed expectation of a cut.

An internal note from Nomura points to the sufficiency of dovish signals to justify an additional risk-management cut, though it acknowledges the decision remains close. The potential change in Fed leadership, with Kevin Hassett being considered to replace Chair Jerome Powell, further complicates the forecasted path for interest rates.

(With inputs from agencies.)