In a latest research report released this Wednesday, JPMorgan's team of economists made a significant revision to their forecast from just a week ago regarding the Federal Reserve's monetary policy path. The team now explicitly expects the Fed to initiate a rate-cutting cycle in December of this year. This judgment completely overturns the bank's previous forecast conclusion released last Friday, which suggested policymakers would delay the first rate cut until January of next year.
The trigger for this critical forecast adjustment stems from recent policy signals released by several heavyweight Fed officials. The research team, led by the bank's US Chief Economist Michael Feroli, specifically pointed out in a client report that recent public comments from core officials with voting rights, such as New York Fed President John Williams, supporting near-term rate cuts, became the decisive factor prompting them to reassess the policy situation.
It is noteworthy that just last week, following the release of the delayed September non-farm payrolls data, JPMorgan had judged, based on the data performance and policy environment at the time, that the Fed would maintain the current interest rate level at its December monetary policy meeting. However, the latest developments indicate that the policy winds within the Fed are undergoing subtle yet important shifts.
According to the revised forecast path, JPMorgan now expects the Fed to implement two consecutive 25-basis-point rate cuts in December this year and January next year. Feroli explicitly wrote in the client report: "We are once again locking in the final rate cut timing for January next year." This implies that the bank believes the Fed will initiate and sustain a clear rate-cutting cycle within the next three months.
Although uncertainty remains about what decision the Fed will make at its next Federal Open Market Committee (FOMC) meeting, Feroli's team emphasized that the latest round of statements from Fed officials has clearly tilted the policy scale towards a December rate cut. This significant shift in policy expectations not only reflects the Fed's reassessment of the current economic conditions but also signals that the global monetary policy environment might be approaching an important turning point.
The importance of this forecast revision lies in the fact that, as one of the most influential financial institutions on Wall Street, JPMorgan's policy expectation adjustments often attract widespread market attention and trigger chain reactions. The Fed officials' statements upon which this prediction change is based, especially policy hints from core figures like New York Fed President John Williams, are typically seen as an important window into the internal policy consensus of the Fed.
From a market impact perspective, this forecast revision could strengthen financial market expectations that the Fed is about to embark on an easing cycle, thereby having profound effects on global asset prices, exchange rate fluctuations, and capital flows. Simultaneously, it also reflects the policy dilemma the Fed faces in balancing the dual objectives of inflation control and economic growth, as well as the flexibility and pragmatic attitude of policymakers when responding to fluctuations in economic data.
