The Federal Reserve began the much-anticipated interest rate cut cycle with a 50 basis point cut overnight, which, although in line with market expectations, is undoubtedly a surprise to many major banks such as UBS and HSBC, who have been calling for a 25 basis point cut.

Now that the "boot" has dropped, Wall Street is starting to focus on the Federal Reserve's next move, and there are conflicting opinions among investment banks as to whether the next move will be a big one.

The overnight release of the dot plot shows that there is still at least 50 basis points of room for interest rate cuts this year. Combined with Powell's "hawkish" stance on monetary policy at the press conference, UBS is more inclined to believe that the Federal Reserve will slow down the pace of rate cuts and cut rates by 25 basis points at each of the two remaining interest rate meetings this year.

Compared to cautious UBS, their counterparts on Wall Street, JPMorgan and Bank of America, appear more optimistic and aggressive. JPMorgan predicts that the Federal Reserve will cut rates by 50 basis points again in November, while Bank of America predicts a total cut of 75 basis points this year.

Given the dovish dot plot, Citigroup believes it is difficult to determine whether there will be further significant rate cuts in the future. Goldman Sachs and HSBC, on the other hand, expect the Federal Reserve to cut rates by 25 basis points at each of the next six interest rate meetings and reach the end of rate cuts by mid-next year.

JPMorgan: Another 50 basis point cut depends on the labor market, Bank of America: Expect another 75 basis point cut this year!

JPMorgan's chief US economist, Michael Feroli, insists that the Federal Reserve will cut interest rates by another 50 basis points in November, but this will depend on the weakness of the US labor market.

In his latest report, Feroli wrote:

We still expect that the pace of (US) rate normalization will be faster than the median shown on the dot plot. We expect a 50 basis point rate cut at the next meeting in early November, but this depends on the two (nonfarm) employment reports released during that period.

If the labor data is more moderate, it will provide a basis for the FOMC to cut rates by 25 basis points at each remaining meeting this year.

It is worth mentioning that Feroli correctly predicted the magnitude of this rate cut by the Federal Reserve. Since August 2, he has consistently argued that the Fed will cut rates by 50 basis points in September, even after a Citigroup colleague abandoned the same bet, he still stuck to his own prediction.

While JPMorgan celebrates its victory, other Wall Street banks are beginning to adjust their forecasts for future interest rate paths.

Bank of America raised its forecast for the remaining rate cuts by the Federal Reserve to 75 basis points, up from the previous expectation of 50 basis points.

The bank's global research department wrote in a report released on Wednesday:

We believe that the Federal Reserve will be forced to further cut interest rates.

Bank of America also stated that after a substantial interest rate cut, "we doubt whether the Federal Reserve will be willing to bring hawkish surprises."

Goldman Sachs, HSBC: Interest rates will reach the end by mid-next year.

Jan Hatzius, Chief Economist at Goldman Sachs, expects that from November of this year to June of next year, the Federal Reserve will consecutively cut interest rates by 25 basis points, and the interest rate will reach the end point of 3.25% - 3.50% by mid-2025.

Today's 50 basis point interest rate cut indicates a more urgent situation, and most FOMC members expect the pace of interest rate cuts to accelerate by 2025, so we believe that a longer period of consecutive interest rate cuts is the most likely path.

However, it is still "difficult to say" whether there will be another 25 basis point interest rate cut or a 50 basis point interest rate cut in November, according to Hatzius. The determining factor will be the next two non-farm payroll reports. According to CME's Federal Reserve observation tool, the probability of a 50 basis point interest rate cut in November is only 31%.

HSBC currently predicts that the Federal Reserve will cut interest rates by 25 basis points at each of the next six policy meetings, and the target interest rate will be lowered to 3.25% - 3.50% by June next year. However, if the unemployment rate stabilizes at some point in the future, this could provide a reason for the FOMC to slow down or even pause interest rate cuts.

Citigroup: "It's hard to say if there will be a significant rate cut in the future."

So far, traders are betting that the Fed will cut rates by 70 basis points this year.

Citigroup trader Akshay Singal accurately predicted a 50 basis point cut weeks ago. However, after seeing the rare dissenting vote and the less dovish new dot plot from the Fed, Singal says it's difficult to determine the pace of future rate cuts.

Currently, just over half of the policymakers expect a total cut of at least 50 basis points this year. Singal believes that although Powell has a lot of power in pushing the policy, his own attitude is obviously more dovish than other members, but due to internal disagreements, the extent of future rate cuts is uncertain:

Powell holds a great deal of power, and in the next few months, the key is to understand how dovish he actually is.

Data released on Thursday showed that initial jobless claims in the U.S. for the week ending September 14 were lower than expected, highlighting the resilience of the labor market and pushing the 10-year U.S. Treasury yield up 4 basis points to 3.76% in the short term.

"In the next few weeks, the US bond yield curve may experience further sideways volatility," wrote strategists Jay Barry and others. "It is unlikely that the money market will anticipate whether the interest rate cut will accelerate or whether the neutral interest rate will decrease before we see the September employment report."

Editor/Lambor