Wall Street and the Federal Reserve are starting to align.
Although Fed Chair Jerome Powell said on Monday the central bank’s next two moves would probably involve 25 basis-point cuts in interest rates, traders didn’t really believe it.
As recently as this morning, expectations were high for a total rate cut of 75 basis points over the Fed’s next two moves.
But after today’s blowout jobs report, the CME FedWatch Tool, a tracker for market expectations for future interest rate levels, showed traders align with the Fed’s communication.
Now, BofA Global Research’s Aditya Bhave, in a note on Friday, also shifted his November call from a 50 basis-point cut to a 25 basis- point cut.
The rest of his Fed path is unchanged, with estimates of 25 basis-point cuts for the first two meetings of 2025 in January and March, and then 25 basis points per quarter until the end of 2025.
His estimate for the peak interest rate has now increased by 25 basis points, now projected to be between 3% and 3.25%. Essentially, he expect rates to be higher than previously anticipated.
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