JP Morgan, Goldman Sachs Predict Fed Will Cut Rates In December

JP Morgan and Goldman Sachs have realigned their interest rate outlooks, now forecasting that the Federal Reserve will deliver a quarter-point cut after its Dec. 9-10 meeting.

JP Morgan Reverses On Earlier Stance On Rate Cuts

JP Morgan, reversing its earlier prediction of a pause until January, cited recent comments from central bank officials as the primary driver for the shift.

“We now believe the latest round of Fedspeak tilts the odds toward the Committee deciding to cut rates in two weeks,” wrote chief U.S. economist Michael Feroli, according to Reuters.

The bank had previously withdrawn its December forecast following volatility in September jobs data, but has now shifted back its outlook.

Goldman Sachs concurred in a separate note, stating that with no major data releases scheduled before the meeting, the previous employment reports “may have sealed a 25 basis points cut.”

Fed Officials Signal Rate Cut Is Coming

The Wall Street pivot aligns with recent signals from New York Fed President John Williams. Speaking in Chile, Williams characterized the current monetary policy as “modestly restrictive” and stated he sees “room for a further adjustment in the near term” to move policy toward a neutral stance.

Williams noted that while inflation progress has “temporarily stalled” around 2.75%, the labor market has cooled to pre-pandemic levels.

“Downside risks to employment have increased… while the upside risks to inflation have lessened somewhat,” Williams said. He also estimated that recent tariffs contributed up to 0.75 percentage points to the current inflation rate, but maintained that underlying inflation is trending downward.

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Market Signals About 85% Chance Of Rate Cuts

Market sentiment has surged to match these forecasts, with traders now pricing in a nearly 84.7% chance of a cut, as per the CME Group's FedWatch tool.

This consensus comes despite reports of internal friction, with Fed Governor Stephen Miran reportedly pushing for aggressive easing while signaling he would support a standard cut to avoid “inflicting real harm” on the economy.

Following the Thanksgiving holiday, the futures of Dow Jones, S&P 500, and Nasdaq 100 indices were trading higher ahead of the beginning of half day of trading on Friday.

The SPDR S&P 500 ETF Trust (NYSE:SPY) and Invesco QQQ Trust ETF (NASDAQ:QQQ), which track the S&P 500 index and Nasdaq 100 index, respectively, closed higher on Wednesday. The SPY was up 0.69% at $679.68, while the QQQ advanced 0.88% to $614.27, according to Benzinga Pro data.

Read Next:

• Trump Loyalist Stephen Miran’s ‘Utterly Incoherent Case For Rate Cuts’ Convinces ‘No-One,’ Says Economist After His Dissent

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

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