Wall Street Weighs In: Will Fed Cut Rates in December?
The Federal Reserve is set to convene on December 9-10 to determine the direction of the federal funds rate. Recent trends indicate that the likelihood of a 25 basis points rate cut has diminished significantly. Morgan Stanley has altered its expectations, projecting that a rate cut is unlikely in December.
Key Insights from the Fed Meeting
Analysts at Morgan Stanley recently noted that the expectation for a December rate cut has changed due to strong job growth. September’s nonfarm payrolls increased by 119,000, surpassing the anticipated 50,000. This positive performance leads the firm to anticipate possible rate cuts in January, April, and June 2026, targeting a range between 3.00% and 3.25%.
Morgan Stanley’s Analysis
The resurgence in payrolls indicates that the expected slowdown in the economy may have been overstated. Strategists at Morgan Stanley commented on the strong labor market, suggesting it diminishes the necessity for an immediate rate cut.
Goldman Sachs’ Perspective
In contrast, Goldman Sachs maintains that a 25 basis points reduction in December is feasible. Kay Haigh, co-Head and co-CIO of Fixed Income and Liquidity Solutions at Goldman, highlighted that the unemployment rate has escalated to 4.4%. This is the highest figure recorded since October 2021. Additionally, inflation is approaching the Fed’s target of 2%, contributing to ongoing discussions about potential rate adjustments.
Wells Fargo’s Forecast
Wells Fargo’s economist, Sarah House, is optimistic regarding a December rate cut. However, she cautions that it will be a “close call” due to recent dissent among Fed officials. The labor market’s current softness may support this anticipated reduction.
Conclusion: The Fed’s Rate Decision Ahead
As the Federal Reserve’s meeting approaches, market analysts continue to speculate on the potential outcomes regarding interest rates. The contrasting views of major financial institutions underline the complexity of the current economic landscape.
- Federal Reserve Meeting: December 9-10
- Current Unemployment Rate: 4.4%
- September Nonfarm Payrolls: 119,000
- Projected Target Range (2026): 3.00% – 3.25%
