Fidelity International: Expects the U.S. to cut interest rates two more times this year; predicting future Federal Reserve responses may become more difficult
Fidelity International predicts that the Federal Reserve will cut interest rates two more times this year, after which it will pause rate cuts, making future responses more unpredictable. The Federal Reserve has shifted its focus to the labor market, alleviating concerns about inflation. Economic forecasts indicate that there may be more rate cuts in the future, especially after the new chairman takes office. Comments from the U.S. Treasury Secretary also suggest that the government hopes to pursue broader reforms, and future policy responses need to pay attention to the political situation
According to the Zhitong Finance APP, Salman Ahmed, head of Global Macro and Strategic Asset Allocation at Fidelity International, stated that the Federal Reserve has reduced interest rates by 0.25% as expected, bringing the target range for the federal funds rate down to between 4% and 4.25%. Looking ahead, the bank expects the Federal Reserve to cut rates two more times this year before pausing further cuts, and the Fed's future responses will become more unpredictable.
The Federal Reserve's statement reiterated concerns about the downturn in the labor market and commented that inflation is only "slightly warming," indicating that the Fed has shifted its focus to the labor market and is no longer worried about the risks of rising inflation. The Fed's economic forecast summary also highlights this shift in stance and confirms the market's expectation of two more rate cuts this year.
However, when predicting interest rate trends for 2026, considering that the Federal Reserve may have a new chair starting in May 2026, it suggests a greater likelihood of increased rate cuts, which would be inconsistent with maintaining the 2% inflation target.
Additionally, recent comments from U.S. Treasury Secretary Janet Yellen and others indicate that the government seeks broader reforms at the Federal Reserve. All these messages suggest that the Fed's future responses may differ significantly from the past, so attention should not only be on policies but also on the political situation driving those policies
