Synopsis:

CIBC views the Fed's decision to cut rates by 50bps as a significant move to kickstart its easing cycle, with expectations for another 50bps cut in November.

Key Points:

1. Significant Rate Cut:

   • The Fed opted for a 50bps cut, described as a "giant leap," to advance its easing cycle, compensating for a late start.

2. Balanced Risks:

   • Despite the cut, the Fed maintains that risks to both inflation and employment objectives are balanced and remains vigilant about these risks.

3. Economic Projections:

   • The Fed forecasts GDP growth at 2% and a jobless rate stabilizing at 4.4%, slightly higher than previous projections.
   • PCE inflation is expected to average 2.2% next year, with a slight decrease to 2.0% the following year.

4. Adjusted Dot Plot:

   • The funds rate is projected to reach a low of 2.9% by 2026. The median dot plot indicates a year-end rate of 4.4%, down from 5.1%, and 3.4% by the end of 2025, revised from 4.1%.

5. Future Rate Cuts:

   • CIBC anticipates another 50bps cut in November, followed by a return to 25bps cuts in December and beyond.

Conclusion:

CIBC's outlook suggests the Fed is taking proactive measures to support economic growth, while also indicating a cautious approach moving forward. The expectation for continued rate cuts reflects a strategic response to current economic conditions.