• JPMorgan revises its Fed rate cut forecast, now expecting the first reduction in December instead of September.
  • The shift follows hotter-than-expected January inflation data and a resilient labor market.
  • Other major banks maintain varying outlooks, with some anticipating more aggressive cuts in 2025.

JPMorgan's Revised Fed Outlook

JPMorgan Chase & Co. has pushed back its expectation for when the Federal Reserve will begin cutting interest rates, now forecasting the first reduction in December rather than September as previously anticipated. This significant revision reflects the bank's reassessment of economic conditions and the Fed's likely policy path.

Michael Feroli, JPMorgan's chief U.S. economist, cited January's "hotter-than-expected inflation prints" and a "resilient job market" as key factors behind the revised outlook. The Consumer Price Index rose 0.5% month-over-month in January, with core CPI increasing 0.4%, both exceeding expectations.

The Fed's Current Stance

The Federal Open Market Committee maintained its target rate range at 4.25% to 4.5% at its March meeting, marking the second consecutive pause after implementing a 25 basis point cut in December 2024. This cautious approach suggests policymakers remain concerned about inflation despite some moderation in the Fed's preferred PCE price index, which showed a 0.3% monthly increase in January.

"Elevated inflation expectations should reinforce the Fed's extended pause in its rate cutting campaign," Feroli noted in the revised forecast. However, he added that "inflation may moderate slightly in 2025," potentially creating room for cuts later in the year.

Diverging Wall Street Views

While JPMorgan has adjusted its timeline, other major banks maintain different projections:

  • Citigroup had previously expected a more aggressive 50 basis point cut in December 2024
  • Barclays aligned with JPMorgan's view of a 25 basis point reduction
  • Bank of America and UBS anticipate the Fed Funds Rate reaching approximately 3.25% by 2025's end

The lack of consensus underscores the uncertainty surrounding the Fed's path as it balances inflation concerns against economic growth prospects. JPMorgan now expects the target rate to reach 3.75-4% after the anticipated December cut, a more gradual reduction than some competitors project.

Market participants will closely watch upcoming economic data and Fed communications for clues about whether this revised forecast proves accurate or if further adjustments will be needed in coming months.