JPMorgan Forecasts Three Fed Rate Cuts in 2025, Starting with September Reduction.

JPMorgan Chase's top economist expects the US Federal Reserve to cut interest rates three times in 2025, starting with a 25-basis-point reduction in September. This change in outlook comes after President Trump nominated Stephen Miran to fill a vacant seat on the Fed's board of governors. Feroli previously forecast only one rate cut this year, citing economic uncertainty. The Fed has been cautious on rates, awaiting the impact of Trump's tariffs on inflation.

JPMorgan Chase's top economist, Michael Feroli, expects the U.S. Federal Reserve to cut interest rates three times in 2025, starting with a 25-basis-point reduction in September. This change in outlook comes after President Trump nominated Stephen Miran to fill a vacant seat on the Fed's Board of Governors. Feroli previously forecast only one rate cut this year, citing economic uncertainty. The Fed has been cautious on rates, awaiting the impact of Trump's tariffs on inflation.

The nomination of Stephen Miran, who has been a leading theoretician for the administration's trade reset, could shift the Fed's stance towards a more dovish approach. Miran has been a vocal critic of criticisms that Trump's tariffs are inflationary and has argued that they provide a form of tax revenue that could cut into the federal deficit. His appointment could strengthen the ranks of those advocating for lower interest rates within the Fed.

Feroli's updated forecast reflects growing concerns about the labor market and economic growth. He cited a significant softening in demand for labor, with job growth slowing to just 35,000 new jobs per month over the past three months. Bowman, a Federal Reserve Governor, has also expressed concerns about the potential for businesses to accelerate layoffs if demand continues to weaken. Bowman's comments, along with those from other Fed Governors, have set the stage for potential interest rate cuts as soon as next month.

The Fed's decision to keep rates unchanged at its most recent meeting was the first double dissent in over 30 years, indicating a growing divide among its members. The nomination of Miran, if confirmed by the Senate, could further bolster the ranks of those advocating for a more dovish monetary policy.

Lowered interest rates could provide fiscal breathing room, potentially easing pressure on household finances and the government's balance sheet. However, the Fed must balance this with the risk of inflation, as demonstrated by the Biden years. The central bank will need to be vigilant to avoid a surge in inflation while maintaining investor confidence.

Investors should monitor the Fed's upcoming meetings and statements to stay informed about any changes in monetary policy. The Jackson Hole Symposium, where Fed Chair Jerome Powell is expected to speak on August 22, will provide further insights into the Fed's plans.

References:
[1] https://www.gurufocus.com/news/3043415/jpmorgan-chase-co-reduces-stake-in-ross-stores-inc
[2] https://unherd.com/newsroom/stephen-miran-will-push-the-fed-in-a-more-dovish-direction/?lang=us
[3] https://finance.yahoo.com/news/feds-bowman-makes-case-for-3-interest-rate-cuts-in-2025-after-voting-against-july-hold-161618517.html