Standard Chartered "Fed Expected to Cut Rates by 25bp in December"

JH Kim

Summary

Standard Chartered said it expects the Fed to cut the policy rate by 25bp at the December FOMC.
However, it said the rate-cut decision could be a close call due to a lack of economic data caused by the government shutdown.
Standard Chartered said it would be cautious about further cuts after the December cut and maintained an outlook of rates being held through 2026.

Standard Chartered said it expects the U.S. Federal Reserve (Fed) to cut the policy rate by 25bp(0.25%p) at this week's December Federal Open Market Committee (FOMC) meeting, but it also said the vote could be a "close call."

According to Reuters on the 8th (local time), Standard Chartered described the Fed's December 25bp cut in its report as an "insurance cut(insurance cut)." However, it pointed out that, since economic data releases have been limited following the government shutdown, there is insufficient data to support a decision to cut and decision-making will not be easy.

Standard Chartered assessed that the December rate decision would not be one-sided like "95-to-5," but rather a "close call at about 60-to-40." It said that the limited public indicators due to the shutdown could widen differences of opinion within the Fed.

Markets largely expect a 25bp cut in December. Reuters reported that, based on CME FedWatch, traders are pricing roughly an 89.6% chance of a 0.25%p cut at the December meeting.

However, Standard Chartered suggested it is likely to be cautious about further cuts after the December 25bp cut. The report maintained the outlook that the Fed could hold rates unchanged through 2026.

The FOMC will be held on December 9-10 (local time), and markets are focused on whether the rate decision will be accompanied by signals about the future policy path.