JPMorgan's chief USA economist Michael Feroli is one of the few Wall Street analysts who accurately predicted the 50 basis point rate cut by the Federal Reserve this week, and he expects this scenario to happen again.

Almost all analysts expect the next rate cut by the Federal Reserve to be 25 basis points, with some noting that unexpected increases in core consumer inflation last month may prevent the Fed from making a substantial rate cut. Others on Wall Street warn that a larger rate cut could signal worse economic conditions and the need for additional assistance.

But Feroli stated in a report last Thursday that the Fed should lower rates in July, and a 50 basis point rate cut this month could help decision-makers catch up.

He also pointed out that Federal Reserve Chairman Powell, by emphasizing the strength of the US economy and the desire to maintain strong economic growth, has cloaked the dovish rate decision in a hawkish mantle.

Feroli wrote: 'In other circumstances, a larger move could signal greater concerns about growth, but Powell has repeatedly emphasized that due to slowing inflation, the Fed is able to act to sustain a strong labor market, essentially making this a celebratory rate cut. Additionally, if policy rates are set properly, it should over time position the economy favorably.'

Federal Reserve Governor Waller expressed a similar view in an interview last Friday, stating that he voted for a 50 basis point rate cut because inflation cooling had exceeded expectations.

Federal Reserve officials will meet again on November 6-7, and Feroli expects another 50 basis point cut by then, depending on whether the next two jobs reports show more signs of weakness. He added that if job growth is stronger, this would lead to 25 basis point cuts at the November and December meetings.

According to the observation tool of the Chicago Mercantile Exchange, investors are almost evenly divided on the interest rate cut magnitude for the November meeting, with opinions split between 25 and 50 basis points. Meanwhile, the so-called 'dot plot' forecast by Federal Reserve officials indicates they expect two 25-basis-point rate cuts before the year end.

Regarding Jerome Powell himself, he warned that the large interest rate cut this month does not necessarily mean that the pace of rate cuts in the subsequent easing cycle will be as rapid.

Feroli stated, 'In the end, we believe the most important and least surprising point that Powell made is that future decisions will depend on the data.' Feroli observed, 'If the labor market continues to weaken, we may see more significant rate cuts in the future. If job growth and the unemployment rate stabilize, then the path back to neutrality will become clearer.'

At the same time, economists at Bank of America also see the possibility of a 50-basis-point rate cut in November. Following this, they expect a series of 25-basis-point rate cuts until the federal funds rate reaches 2.75%-3% at some point in 2025, below the current 4.75%-5%.

Economists at Citigroup have held a bearish view on the economy for several months and have warned that a recession is likely inevitable. They also anticipate a 50-basis-point rate cut at the next Federal Reserve meeting, with a leaning towards further significant rate cuts in the future.

In a report, Citigroup wrote, 'Powell finds it hard to explain why the labor market would not deteriorate further but instead stabilize at its current levels when interest rates are expected to remain at what the Fed sees as at least restrictive levels for the next year. Given his description of last week's 50-basis-point cut as a 'commitment' to prevent falling behind the curve, we believe the threshold to prompt further significant rate cuts is low.'

Editor/Emily