J.P. Morgan AM: The US interest rate cutting cycle has started
J.P. Morgan AM: The US interest rate cutting cycle has started
The Federal Reserve’s (Fed) 50 basis point (bp) cut last week has been the subject of much discussion. For fixed income investors, however, at what level the cutting cycle ends is more important than how it starts.
The latest dot plot shows the Fed now expects to deliver a relatively rapid pace of rate cuts. The median policymaker’s projection points to a further 150bps of cuts by the end of next year before rates settle at 2.9% from 2026 onwards. While Chair Powell was upbeat on the current state of the economy, he was clear that the Fed stands ready to do more if the data demands it. For multi-asset investors, this means that despite markets pricing a faster pace of cuts than the Fed, bonds can still diversify portfolios if growth weakens more than expected.
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