FED: NatWest, Nomura, BMO, Rabo, Swedbank Tweak Fed Views (2/3)

The following analysts revised their Fed calls after the September meeting:

• NatWest: Pulling forward a cut to Q4 2025 from Q1 2026, and adding 75bp of cuts beginning in June: Their new view sees "a quicker steady stream of consecutive 25bp rate cuts", with 25bp in Oct and 25bp in Dec (previously only saw 25bp cuts in Dec and Mar). "We are also folding in an additional 75bps of easing post-Powell into our forecast profile, as we are growing increasingly concerned about potential slowing in the labor market along with the likelihood of a more dovish leaning FOMC composition once a new Fed chair takes over."
• Nomura: Adding 3 cuts to their expected rate path: "We have revised our forecast and now expect two additional cuts this year (we had previously forecast a pause in October and a cut in December). Less emphasis on inflation risks and a likely shift in Fed leadership next year leads us to forecast three additional cuts in 2026 in March, June, and September. We had previously expected the easing cycle to end after March....our updated expectation the terminal rate is 2.875%, down from 3.625% prior to today."
• BMO: Adding an October cut: "With policy rates still 100-to-125 bps above the neutral level and the deterioration in labour market conditions expected to persist through at least the turn of the year, we reckon the ‘dot plot’ is a decent road map for the remainder of this year. We now look for two more quarter point rate cuts this year (October-end and mid-December), compared to only one more action previously. Afterward, as before, we expect the rate cut cadence to slow (to once per quarter), lowering the fed funds range to 2.75%-to-3.00% (just a tad below neutral). We’re just getting there a little more quickly as the Fed looks past still sticky inflation with an eye on the labour market."
• Rabobank: Adding an October cut: "Powell’s dovish tone and shift in the mandate towards labor suggests that we may see more frontloading of cuts than originally anticipated (though certainly not the 100bp by year-end proposed by a certain anonymous member of the board). We now forecast another 25bp cut at the October 29 meeting, and still see a terminal Fed Funds rate of 3.00%. The risk to our view is skewed to two more cuts this year over none, due to the rapidly deteriorating state of the U.S. labor market."
• Swedbank: Adding an October cut: "Given Fed’s messaging today, we change our call and now expect the Fed to cut interest rates by 25 bps both in October and December (previously we forecasted a cut only in December). We keep our forecast for the terminal rate next year unchanged, however."