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Jun 06 - 10:55 AM

SocGen: We Don't Expect Fed Rate Cuts this Year But Expect Them to Do So in Q1 2025

By eFXdata  —  Jun 06 - 09:30 AM

Synopsis:

Societe Generale (SocGen) projects that the Federal Reserve will maintain its current interest rates throughout 2023, with rate cuts expected in the first quarter of 2025. This expectation is shaped by recent economic indicators and their implications for future monetary policy and the US dollar.

Key Points:

  1. Fed Rate Cut Timing:

    • SocGen does not anticipate the Fed cutting rates in 2024.
    • Rate cuts are expected to occur in Q1 2025.
  2. Economic Data Analysis:

    • Recent ISM data have been inconclusive.
    • The upcoming focus will be on payrolls data.
  3. Growth and Inflation Outlook:

    • The initial acceleration in Q1 activity has given way to slower growth.
    • This deceleration aligns with expectations for rate cuts once inflation data allow.
  4. Impact on the US Dollar:

    • Anticipated rate cuts in 2025 are likely to lead to a depreciation of the US dollar.
    • The dollar's decline would be influenced by the large inflows of capital into US markets due to higher rates and stronger growth compared to other regions.

Conclusion:

SocGen foresees the Fed holding off on rate cuts until early 2025, a decision driven by recent economic data suggesting slower growth and persistent inflation concerns. This anticipated shift in monetary policy is expected to result in a weaker US dollar as the large sums invested in US markets during the period of higher rates begin to flow out.

Source:
Société Générale Research/Market Commentary

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