Aberdeen: It is expected that the Federal Reserve will cut interest rates in March next year, provided that inflation continues to cool
Aberdeen expects the Federal Reserve to cut interest rates in March next year, provided that inflation continues to cool. Despite the recent 25 basis point rate cut by the Federal Reserve, Powell still exhibits a hawkish tone due to short-term inflation strengthening and reduced risks in the labor market. Aberdeen believes that changes in the Trump administration's policies may lead to increased market volatility, while regulatory easing will benefit business activities, release capital allocation, and enhance productivity. Aberdeen also pointed out that in the context of increased trade tariffs, a strategic approach is being taken to manage investments in emerging markets
According to the Zhitong Finance APP, Zhang Dongyue, the Asia-Pacific regional head of the multi-asset and solutions investment expert team at Aberdeen, stated that despite the Federal Reserve's 25 basis point rate cut this morning, Powell still exhibited a hawkish tone considering the short-term inflation strengthening and the weakening risks in the labor market. These signals reinforce the bank's view that the Federal Reserve will pause rate adjustments in January to slow down the pace of easing. Aberdeen expects a rate cut in March, provided that inflation continues to cool. The bank believes that the risk leans towards reducing rate adjustments, especially if the Trump administration takes unexpected actions in its early governance.
Given the slight change in the Federal Reserve's tone, Aberdeen expects that under the backdrop of a policy shift in the Trump administration in 2025, market volatility will intensify. Additionally, the benefits brought by regulatory easing and a more favorable environment for business activities will unleash capital allocation and enhance productivity. Due to a healthy labor market, expanded capital expenditures related to artificial intelligence, and increased capital market and trading activities under regulatory easing, the bank expects the U.S. market to remain resilient.
However, Trump announced that he may impose a 25% tariff on all products from Mexico and Canada. Against the backdrop of increasing trade tariffs, Aberdeen is adopting a strategic approach to manage investments in emerging markets. The bank sees that the Federal Reserve's rate cut will benefit emerging markets; however, considering the ongoing U.S. fiscal stimulus measures and the strong outlook for the dollar, inflation may prove to be stickier than expected, creating a contradiction between the two considerations