David Kohl, Chief Economist of Credit Suisse, said that due to the current policy interest rates still being relatively high compared to the neutral interest rate, it is expected that at the Federal Open Market Committee meeting in November, the Federal Reserve will once again cut interest rates by 50 basis points, followed by a series of 25 basis points cuts, resulting in the federal funds rate target range falling to 3.25% to 3.5% by May 2025.

Kohl stated that the aforementioned target range is a neutral interest rate level, allowing the Federal Reserve to pause and maintain interest rates unchanged for the remaining time of this year. This preemptive rate cut approach, which adjusts US monetary policy from highly restrictive to a neutral stance, increases the probability of achieving a soft landing for the US economy. Long-term interest rates have already declined prior to the FOMC decision, and with the increased probability of a soft landing, they are expected to rise moderately over the next 12 months. The bank has adjusted its outlook for 3-month and 12-month rates to 3.95% and 4%, respectively. (vc/k)

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