JPMorgan Revises Prediction, Anticipates Fed Rate Cut in December

JPMorgan Chase & Co. economists now project that the Federal Reserve will reduce interest rates next month, reversing their previously brief assessment that rate cuts would be deferred until January.

A team of analysts headed by Chief U.S. Economist Michael Feroli explained on Wednesday that recent remarks from key Federal Reserve officials—most notably John Williams, President of the Federal Reserve Bank of New York—endorsing a near-term rate reduction prompted them to reevaluate their stance.

The bank, previously suggesting a pause following last week’s release of the postponed September jobs report, now predicts imminent policy easing.

The Federal Open Market Committee (FOMC), chaired by Jerome Powell, is scheduled to convene in Washington on December 9 and 10. According to JPMorgan’s forecast, the Fed is expected to implement two quarter-point cuts, one in December and another in January.

“We’re returning to the expectation of a final rate cut in January,” Feroli wrote in a client memo. “While the upcoming FOMC meeting remains a close decision, we now believe the latest round of Fed communications has shifted the probabilities in favor of a rate cut in two weeks.”

The revised outlook from JPMorgan aligns with the current sentiment of swap traders, who now estimate an approximately 80% likelihood of a quarter-point rate reduction next week, a significant increase from less than 30% a week earlier. The shift follows the release of September labor data and key comments from John Williams.