(Bloomberg) — The Federal Reserve is likely to downsize its rate cuts to 25 basis points at both the November and December policy meetings, according to Aichi Amemiya at Nomura Securities International.
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“I do not think that the Fed is considering an additional 50 basis-point rate cut at the moment,” the senior economist said in an interview with Bloomberg News. His comments on Sept. 27 and Oct. 1. preceded a solid September jobs report.
Fed Chair Jerome Powell has also shown he “has an outsized influence in the policy making process on the Federal Open Market Committee,” Amemiya said.
Powell’s speech at Jackson Hole in late August was very dovish, he said, and the FOMC followed up at the September meeting with a larger half-percentage-point rate reduction. “His opinion leads the committee.”
At the annual meeting of the National Association for Business Economics on Monday, Powell emphasized that the overall US economy was solid and said “This is not a committee that feels like it’s in a hurry to cut rates quickly.”
Amemiya cited the increasingly influential Powell’s less aggressive stance toward another larger cut as a reason why he forecasts the Fed will deliver two additional 25 basis-point rate cuts in November and December.
“Although it depends on incoming data, the Fed will skip lowering the rates in January and shift to quarterly rate cuts in 2025. So after December rate cuts, the following cuts are expected to take place in March,” he said.
The September meeting was a close call between a 25 basis-point cut and a 50 basis-point cut until decision time, which Amemiya said was very unusual.
Amemiya said the Fed’s communication process was “a mess” ahead of the meeting. The Fed declined to comment.
“Prior to the blackout period of the September meeting, none of the FOMC participants explicitly indicated a 50 basis-point rate cut, including the Governor Christopher Waller who made a speech just before the period,” he said.
The next FOMC meeting is Nov. 6-7. During the next blackout period, the October employment report is released on Nov. 1 and the US presidential and congressional elections are on Nov. 5.
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