Fed closing in on end of rate-cut cycle: Macquarie

Investing.com — Investors now are expecting even fewer rate cuts than the Fed’s hawkish forward guidance seen earlier this week, suggesting the end could be near for rate cuts.

“Market pricing moved hawkishly and towards our view of just one further 25 bps cut outlined in our team’s 2025 outlook,” analysts from Macquarie said in a note.

The bet on just one cut  next year, which Macquarie expects to occur in March or May, comes a day after the Federal Open Market Committee cut its benchmark rate by 25 basis points to a range of 4.25% to 4.5% at its December meeting on Wednesday.

The cut was accompanied by a hawkish forward guidance as the Fed’s projections see just 50 basis points of cuts in 2025, down from100 basis points in September. The long-run dot also edged higher to 3.0%, marking its fourth consecutive quarterly rise, the analysts added.

Fresh inflation concerns were driver for the hawkish shift, the analysts said, noting that 15 participants now see risks to the core PCE projection as weighted to the upside, up from just 3 in September.

Following the December meeting, Macquarie said it believes the Fed is closing in on the end of the rate-cutting cycle. 

“Our baseline remains for this to occur in March or May with the trough rate for the cycle being in the 4.0 to 4.25% range,” Macquarie added.