Amid global economic turbulence, the four largest US banks are anticipating a drastic change in the Fed's monetary policy. This forecast could have major repercussions for both the US economy and the markets in general.
Why is the US economy pushing the FED to lower its rates?
The recession seems to be knocking at the doors of the American economy. unemployment rate rose from 4.1% to 4.3% in July. That brings the number of unemployed Americans to about 7.2 million.
This deterioration in the labor market seems to be coupled with a staggering loss of $6.4 trillion in the global stock market in three weeks. These have triggered a red alert. Wells Fargo analysts say:
“The FOMC must quickly return to a 'neutral' policy stance or risk falling into a vicious cycle of labor market weakness.”
This precarious situation is pushing experts to anticipate a significant drop in interest rates.
Banking giants' shocking economic forecasts
JPMorgan Chase, Bank of America, Wells Fargo and Citi agree on a scenario of a sharp rate cut by the FED.
- Bank of America believes a September cut is virtually assured.
- Wells Fargo plans a 50 basis point drop in Septemberfollowed by another of the same magnitude in November.
- JPMorgan Chase also shares Wells Fargo's vision.
- As for Citi, its economists anticipate a total reduction of 100 basis points by Novemberwith further declines to come until reaching a range of 3 to 3.25% by mid-2025.
These forecasts reflect deep concern about the health of the U.S. and global economies.
These banking forecasts on the economy and the Fed's policy could reshape the global financial landscape. Investors will therefore have to remain vigilant against the potential economic upheavals that could occur in the coming days.
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