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Jan 14 - 12:55 AM

RBC: Fed Call Change: Terminal Rate Likely Reached, No Cuts in 2025

By eFXdata  —  Jan 13 - 04:30 PM

Synopsis:

RBC has revised its Fed forecast, now projecting no further cuts in 2025. Following the strong US jobs report, they believe the Fed has already reached the terminal rate for this cycle at 4.25-4.50%.

Key Points:

  1. Change in Fed Call:

    • RBC’s US team previously anticipated a final rate cut in January, bringing the terminal range to 4.00-4.25%.
    • Based on recent economic data, they now believe the terminal rate has already been achieved at 4.25-4.50%.
  2. Impact of US Labor Data:

    • The strong December employment report highlighted the resilience of the labor market, prompting this revision.
    • Robust hiring trends and moderate wage growth indicate that the Fed's current policy stance remains appropriate.
  3. Outlook for 2025:

    • The Fed is unlikely to make additional cuts in 2025, maintaining a cautious approach amid economic resilience and persistent inflation risks.

Conclusion:

RBC's shift reflects confidence that the Fed's current terminal rate sufficiently addresses economic conditions, suggesting a prolonged pause on further easing through 2025.

Source:
RBC Research/Market Commentary

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