Source: Caixin.
Author: Liu Rui.

This week, after the results of the US presidential election were announced, wall street in the USA is increasingly concerned about the prospect of a rate cut by the Federal Reserve next year.

On Thursday in the US Eastern Time, following Fed Chairman Powell's remarks, many investment banks further abandoned hope for a significant rate cut by the Fed next year.

Trump's victory may slow down the Fed's rate cuts.

On Thursday in the US Eastern Time this week, the Fed cut the overnight lending rate target by 0.25 percentage points to 4.5%-4.75%, fully meeting market expectations. Meanwhile, the market generally expects the Fed to once again cut the overnight lending rate at the last meeting on December 18th - the final meeting of the year.

However, looking ahead to the Fed's policy path next year, several Wall Street investment banks that previously expected the Fed to continue significantly cutting rates next year have now abandoned this view.

In 2025, the Fed will hold 8 interest rate meetings. Prior to this, banks like Barclays and citigroup believed that the Fed would continue to cut rates at least in the first half of next year's initial meetings. However, Trump's victory disrupted this expectation.

On Thursday in the US Eastern Time this week, teams from Barclays and Citigroup published reports stating that after the Trump administration came to power, there is a high possibility of tightening immigration restrictions and increasing import tariffs, which could stimulate inflation and change the Fed's monetary policy direction.

Goldman Sachs' analyst team, led by Oscar Munoz of Barclays, wrote in their report: "While some investors may expect the Federal Reserve to even start raising interest rates in this situation, we expect that the Fed will choose to pause rate cuts when evaluating the impact of these factors on inflation and economic growth."

Barclays believes that the Federal Reserve will keep interest rates unchanged from January to July next year, giving FOMC officials time to assess the impact of Trump's new policies, and then, if there is an economic slowdown, they will resume rate cuts.

The team led by Marc Giannoni, Chief Economist of Barclays USA, raised their forecast for next year's US inflation and lowered their GDP expectations. They predict that the Fed will reduce the number of rate cuts in 2025 from the previously forecasted 3 times to 2 times.

Powell expresses increased concerns.

Economists led by Jan Hatzius of Goldman Sachs, after studying Powell's comments following the rate cut on Thursday, believe that the Federal Reserve "may want to take more cautious action to ensure they find the right endpoint on the rate cut path."

During the press conference of the Federal Reserve's interest rate decision on Thursday, although Powell emphasized that "the election results will not affect our policy decisions in the short term," he also acknowledged that the policies of the next government may impact the economy, affecting the Fed's dual mandate of maximum employment and price stability.

Currently, Goldman Sachs' latest forecast is that there will be a 25 basis point rate cut at every meeting before March next year, and then the final rate cut in June and September next year.

After the election results were announced on Wednesday Eastern Time, JPMorgan and Nomura Securities were among the first to update their forecasts. JPMorgan predicts that due to the "uncertainty of the Trump administration's policies," the Fed will switch from rate cuts at every meeting next year to one rate cut per quarter starting from March.

Nomura, on the other hand, predicts that the Federal Reserve may only cut interest rates once next year, and warns that if inflation in the USA heats up after Trump takes office, the Fed's rate-cutting cycle may come to a sudden halt.

Editor/Jeffy