• Deutsche Bank revises its Fed forecast, now expecting a 25 basis point cut at each of the three remaining meetings this year.
  • The shift signals growing anticipation of a more accommodative policy stance amid economic headwinds and inflation uncertainty.
  • Markets are closely watching for the Fed's next move, with implications for borrowing costs, asset prices, and global capital flows.

Deutsche Bank AG has significantly altered its outlook for U.S. monetary policy, now projecting the Federal Reserve will implement three consecutive 25 basis point interest rate cuts in 2025, according to the bank's latest research. This updated forecast, which anticipates easing at each of the Fed's remaining meetings this year, marks a decisive shift from its previous call for cuts only in September and December.

The revision reflects a rapidly evolving consensus on the need for more substantial monetary support. The bank's analysts pointed to a confluence of factors, including concerns over slower GDP growth, a modest but concerning rise in unemployment, and persistent inflation expectations that remain above the central bank's target. The Fed’s own recent forecasts have noted lower GDP growth, projecting a rate of 1.4%, alongside a slightly higher unemployment rate of 4.5% and a core PCE inflation figure hovering around 3.0%.

"The data is increasingly pointing towards a need for a more proactive approach," a source familiar with Deutsche Bank's internal deliberations said, speaking on condition of anonymity. "The 'wait-and-see' stance is giving way to a recognition that economic momentum is moderating faster than anticipated."

This dovish pivot from a major global investment bank, with assets exceeding €1.3 trillion, is being closely watched by traders. The structured finance and CLO markets, in particular, have already shown optimism on the prospect of lower global rates, with spreads tightening and investor participation growing. If the forecasts hold, borrowers from consumers to large corporations could see relief in loan and mortgage costs, while savers may face lower yields on conservative investments.

The Fed's decision-making is being complicated by ongoing geopolitical and trade uncertainties, which contribute to inflationary risks even as growth cools. This creates a complex backdrop for policymakers, who must balance the need to support the economy against the risk of reigniting price pressures. Other major central banks, including the ECB and the Bank of England, are facing similar dilemmas, setting the stage for a synchronized—though cautious—global shift toward easing.

Deutsche Bank, which reported stable revenues in 2024 but has faced pressure from the high-rate environment, did not immediately respond to a request for further comment on its revised modeling. The bank's updated outlook places it among the more assertive forecasters anticipating a series of cuts, underscoring the high-stakes nature of the Fed's upcoming decisions for financial markets and the broader economy.