HSBC now expects the U.S. Federal Reserve to cut interest rates three times between September 2024 and March 2025, citing persistent inflation above the Fed's 2% target and growing economic uncertainty.

HSBC's Updated Rate Cut Timeline

The bank forecasts:

• September 2024: First 25-basis-point cut

• December 2024: Second 25-basis-point cut

• March 2025: Third 25-basis-point cut

This would bring the federal funds rate to 3.50-3.75% by the end of next year, down from the current range of 5.25-5.50%.

Why HSBC Is Expecting Rate Cuts

• Sticky Inflation: HSBC doesn't expect inflation to drop below the Fed's 2% target through the forecast window.

• Labor Market Risks: If labor data deteriorates, more aggressive cuts are possible.

• Policy Patience: Fed Chair Jerome Powell emphasized a cautious approach at the most recent FOMC meeting.

Despite a hawkish tone, HSBC believes macro pressures and rising fiscal risks will eventually lead to more dovish action by early 2025.

Market Implications and Dollar Outlook

HSBC notes that forex markets are increasingly influenced by U.S. trade policy, fiscal debates, and geopolitical tensions, rather than just Fed guidance. As a result, the bank sees further U.S. dollar weakness on the horizon.

Follow Fed-Sensitive Indicators in Real-Time

To track how economic data could influence Fed policy moves, use the Economics Calendar to monitor key macroeconomic releases, including CPI, labor market updates, and GDP figures.

For insight into how interest rate trends may impact U.S. markets, the Commodities section also provides updated pricing for rate-sensitive assets like gold and oil.