TD Securities: The Fed will reach a neutral interest rate later
TD Securities stated that the latest market reaction after Trump's election victory indicates that the market expects a combination of tax cuts and tariffs, which will push up the neutral interest rate of the Federal Reserve.
We are changing our forecast for the Federal Reserve because rising inflation will slow down the pace of interest rate cuts in 2025. We now expect the Federal Reserve to cut interest rates by 25 basis points in November, December, and January, and then pause in March. The Federal Reserve will continue to lower interest rates in a "cut-pause-cut" pace until the end of 2025, lowering the interest rate to 3.5%, which is higher than the previous expectation of 3.0%.
In the first half of 2026, the Federal Reserve will cut interest rates to 3.0%, which means we do not see any change in the neutral interest rate, but the Federal Reserve will arrive there later.
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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