DWS: Downgraded the forecast for the number of interest rate cuts by the Federal Reserve before the end of next year to 3 times

According to the Zhitong Finance APP, Christian Scherrmann, Chief U.S. Economist at DWS, stated that recent U.S. economic data has been mixed. Although the labor market appears to be weakening amid fluctuations, inflation remains stubborn. Nevertheless, DWS believes that some progress has been made in curbing inflation, and there is still a possibility of further interest rate cuts. DWS has revised its forecast for rate cuts before the end of 2025 from five times to three times (including one in December) and expects the central bank to slow down the pace of rate cuts after the December meeting. In terms of timing, the bank anticipates that the Federal Reserve may switch to adjusting rates quarterly in the first half of 2025, and then pause the normalization of interest rate policy in the second half of the year.

In addition, DWS indicated that future fiscal and trade policies remain major unknowns. Federal Reserve Chairman Jerome Powell clearly stated in the last meeting not to over-speculate or anticipate, but DWS believes that at least the extension of the Tax Cuts and Jobs Act provisions should be considered in future outlooks. Unlike other policy proposals (such as tax cuts, tariffs, or immigration), lawmakers seem to have reached a certain consensus on extending existing stimulus measures. Therefore, households and businesses may expect domestic demand to be stronger, potentially leading to increased hiring or maintaining current consumption.

DWS believes that the Federal Reserve will signal that it will take longer to lower interest rates to neutral (which the bank expects to be between 3% and 3.5%). Thus, the bank anticipates that the upcoming economic forecast summary will show that the economy will continue to grow strongly in 2025, but the number of rate cuts will decrease, while inflation will rise slightly