FACTBOX-Wall St ramps up September rate-cut bets after Powell's dovish tone
August 26 (Reuters) - Morgan Stanley became the latest brokerage to forecast a cut in interest rates in September, joining global peers after Federal Reserve Chair Jerome Powell hinted at policy-easing next month.
Deutsche Bank, BNP Paribas and Barclays pulled forward their rate-cut forecasts to September after Powell emphasized increasing risks to the labor market at the Jackson Hole economic symposium on Friday.
"We continue to believe that monetary policy must be forward-looking and consider the lags in its effects on the economy," Powell said, adding that the Fed must balance risks to both its job and inflation mandates when setting policy.
Last month, the U.S. central bank held interest rates steady, maintained its projection for two cuts this year and slightly dialed back its outlook to just one 25-basis-point cut in 2026 and 2027.
Traders are now pricing in an 81.9% chance of a September cut, according to LSEG data. The rate-setting Federal Open Market Committee is set to meet on September 16 and 17.
Here are the forecasts from major brokerages for 2025:
Brokerage | Total cuts in 2025 | No. of cuts in 2025 | Fed Funds Rate (end of 2025) |
Citigroup | 75 bps | 3 (starting in September) | 3.00-3.25% (March 2026) |
Wells Fargo | 75 bps | 3 (starting in September) | 3.50-3.75% |
Goldman Sachs | 75 bps | 3 (Starting in September) | 3.50-3.75% |
Macquarie | 50 bps | 2 (in September and December) | 3.75-4.00% |
J.P.Morgan | 75 bps | 3 (Starting in September) | 3.50-3.75% |
Barclays | 50 bps | 2 (in September and December) | 3.75-4.00% |
Nomura | 50 bps | 2 (in September and December) | 3.75-4.00% |
Morgan Stanley | 50 bps | 2 (in September and December) | 3.75-4.00% |
Deutsche Bank | 50 bps | 2 (in September and December) | 3.75-4.00% |
BofA Global Research | No rate cut | 0 | 4.25-4.50% |
UBS Global Research | 100 bps | Starting in September | 3.25-3.50% |
BNP Paribas | 50 bps | 2 (in September and December) | 3.75-4.00% |
HSBC | 50 bps | 2 (in September and December) | 3.75-4.00% |
UBS Global Wealth Management | 100 bps(by H1 2026) | Starting in September | 3.25-3.50% (End of H1 2026) |
* UBS Global Research and UBS Global Wealth Management are distinct, independent divisions in UBS Group
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