Deutsche Bank expects Fed to cut interest rates by 25 bps each in all three meetings this year vs prior forecast of cuts in September and December

Deutsche Bank expects Fed to cut interest rates by 25 bps each in all three meetings this year vs prior forecast of cuts in September and December

Deutsche Bank has revised its expectations for the Federal Reserve's (Fed) interest rate cuts, predicting a 25 basis points (bps) reduction in all three meetings this year, compared to its prior forecast of cuts in September and December . This new outlook reflects recent economic data and market conditions.

The revised forecast comes amidst growing concerns over the U.S. economy's slowdown in employment growth. The Fed is anticipated to cut rates for the first time since December at its upcoming meeting, with markets pricing in a 25 bps reduction . Deutsche Bank's updated projection aligns with this market expectation.

The bank's new stance underscores its belief that the Fed's current policy cycle is nearing its end. The 2% level is seen as the terminal rate, with further easing only possible if inflation expectations diverge from the target. The ECB, in a similar move, has likely completed its interest rate cuts, with 2% as the final rate .

Despite these expectations, Deutsche Bank acknowledges that the possibility of future rate cuts cannot be fully ruled out. The bank highlights that stronger fiscal support in countries like Germany is expected to help keep inflation expectations aligned with the ECB's target .

The revised forecast indicates a cautious approach by the Fed, signaling that the bar for further rate cuts has risen. The bank expects the Fed to pivot back to gradual rate hikes by late 2026, focusing on medium-term inflation risks above the 2% target.