Summary
- The timing of US interest-rate cuts is being pushed back beyond September as inflation concerns widen after a Middle East-driven energy shock.
- Major investment banks including Bank of America, Citi, Nomura, Wells Fargo, JPMorgan, Goldman Sachs and Morgan Stanley adjusted their forecasts for the number of rate cuts and their timing, or projected no cuts this year.
- The Bank of Korea said a prolonged military conflict in the Middle East could intensify inflation expectations and broader price pressures, keeping the Fed on a cautious wait-and-see path.
Forecast Trend Report by Period
The start of Federal Reserve interest-rate cuts is set to be pushed back as a Middle East-driven energy shock fuels inflation concerns. Major investment banks now largely expect the Fed to resume cutting rates in September.
According to the New York office of the Bank of Korea on April 21, most major investment banks expect the Fed to restart rate cuts in September this year. Among 10 firms, only Morgan Stanley projected two cuts before September.
Most banks left their forecasts for the number of cuts unchanged while pushing back the timing. Bank of America moved its projected end point for rate cuts to October from July. Citi, Nomura and Wells Fargo pushed theirs back to December from September.
Citi forecasts three cuts this year. Bank of America, Nomura and Wells Fargo each expect two. TD reduced its forecast to two from three and put the terminal rate at 3.00% on the upper bound. JPMorgan expects no rate cuts this year. Barclays, Goldman Sachs and Morgan Stanley maintained forecasts for two cuts, while Deutsche Bank kept its call for one.
Futures-market rate expectations also moved higher. The implied policy rate for September rose to 3.62% in April from 3.50% in March and 3.25% in February.
Inflation data pointed to mounting price pressures. US consumer prices rose 3.3% in the year through March, the highest level since May 2024. Gasoline prices jumped 18.9%. Price growth for nondurable goods accelerated to 4.9% from 1.7% a month earlier.
Inflation expectations also climbed. One-year inflation expectations rose to 3.8% in March from 3.4% in February.
The Bank of Korea said investment banks expect the Fed to maintain a cautious wait-and-see stance for now because the effects of the energy supply shock could feed into future inflation data with a lag. A prolonged military conflict in the Middle East could also fan inflation expectations and spread price pressures to other categories, it added.
Lee Song-ryul, Hankyung.com reporter yisr0203@hankyung.com
Korea Economic Daily
hankyung@bloomingbit.ioThe Korea Economic Daily Global is a digital media where latest news on Korean companies, industries, and financial markets.
