FED: Deutsche Pulls Forward Next Cut Expectation To September From December
Aug-22 15:51
Deutsche analysts have updated their Fed call following Chair Powell's Jackson Hole speech: saying that it "leaned more dovish than we expected", taking it overall "as a reasonably strong signal that Chair Powell is leaning towards a 25bps reduction in September."
- They now see a 25bp September cut "as most likely.", with 25bp cuts in Dec and March, to Deutsche's estimate of longer-run neutral (3.625% Fed funds midpoint). Previously they'd seen the next cut in December, followed by 2x cuts in Q1 2026 to neutral.
- However, they think Powell carefully chose language to stave off expectations of consecutive cuts: "While a sequential path is possible if upcoming data reinforces worries around the labor market, we think Powell signaled a more cautious approach by noting: “the stability of the unemployment rate and other labor market measures allows us to proceed carefully as we consider changes to our policy stance.”"
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