Zhongjin: The Fed's rate cut may enter the "slow lane"

On November 18, we believe that Powell hopes to send a signal to the market that the Federal Reserve intends to slow down interest rate cuts against the backdrop of a strong economy. Although the next Fed meeting is still a few weeks away, we believe Powell’s comments provide some forward guidance that policymakers are starting to consider lowering the dot plot. We forecast that the new dot plot will show that the number of rate cuts in 2025 will be reduced from four to two, corresponding to an endpoint Intrerest Rate of 3.75%-4.0%. In terms of pace, the Fed will also enter the “slow lane” of interest rate cuts. Our previous judgment was to cut interest rates by 25 basis points in December this year, 25 basis points each in the first and second quarters of 2025, and then stop cutting interest rates. We maintain our view that the pace of rate cuts will slow into 2025.