• Deutsche Bank maintains its forecast for a 25 basis point Fed rate cut in December 2025, followed by a pause until Q3 2026.
  • The bank anticipates an additional 25 bp cut in September 2026 under new Fed leadership, despite conflicting commentary from central bank officials.
  • This outlook comes as Deutsche Bank reports robust financial performance, with Q3 2025 delivering its highest-ever third-quarter profit before tax of €2.4 billion.

Deutsche Bank's research team is standing by its projection that the U.S. Federal Reserve will initiate its easing cycle with a 25 basis point interest rate cut this December, according to people familiar with the matter. The forecast, which has remained unchanged despite recent volatility in economic data, anticipates a subsequent pause until the third quarter of 2026.

The German lender, which recently reported a 64% year-over-year increase in nine-month profit before tax to €7.7 billion, expects another 25 bp cut next September. This second anticipated move would come as the central bank undergoes a leadership transition, adding a layer of uncertainty to the long-term policy path.

This steadfast outlook persists amid a cacophony of voices from the Fed itself. Some officials have been cautioning that inflationary pressures have not cooled sufficiently to justify easing, while others have pointed to emerging softness in labor market data as a potential justification for a more accommodative stance. Efforts to reconcile these conflicting views have so far yielded no clear consensus, leaving market participants parsing every speech and data release.

"The internal debate at the Fed is more fractured than the public statements suggest," said one source close to the discussions, who requested anonymity because the deliberations are private. "But our base case remains that the data will compel a modest cut in December."

Deutsche Bank's own financial resilience, underscored by its forecast for full-year 2025 profit before tax of roughly €10 billion, positions it to navigate the potential interest rate volatility. The bank's strategic focus on operational efficiency, including the completion of a €2.5 billion transformation program, has provided a buffer against global financial headwinds.

When reached for comment, a Deutsche Bank spokesperson declined to elaborate on the specific forecast. A Fed official similarly did not respond to a request for comment on the market expectations.

The timing of the first rate cut has become a focal point for global markets, influencing everything from currency valuations to corporate borrowing costs. With other major central banks, including the European Central Bank, also facing similar policy trade-offs, Deutsche Bank's forecast highlights the delicate balancing act confronting policymakers as they attempt to engineer a soft landing for the U.S. economy.