Bank of America: expect the Fed to cut rates by 75 bps in Q4 and another 125 bps in 2025

The Federal Reserve announced an over-specified 50 basis point rate cut early Thursday morning, which Powell said was meant to demonstrate policymakers' commitment to keeping unemployment low as inflation eases. Bank of America was the only major brokerage to raise its forecast for Fed rate cuts for the rest of 2024 after the Fed's sharp cut, with the Wall Street brokerage saying it expects the Fed to cut rates by 75 basis points in the fourth quarter, after it predicted the Fed would cut rates by 25 basis points at its November and December meetings, respectively. And according to Fed policymakers' own projections, the federal funds rate will fall another 50 basis points by the end of 2024. ‘We are sceptical about the Fed's desire to deliver a hawkish surprise’ in the wake of the sharper rate cuts, the Bank of America economist said. The brokerage expects the Fed to cut rates by another 125 basis points in 2025, bringing the target federal funds rate down to a terminal level of 2.75%-3.00% from the current range of 4.75%-5.00%.