Barclays: It is expected that the Federal Reserve may gradually slow down the pace of interest rate cuts after the December meeting.

Recently, the Barclays research team published a research report on the Federal Reserve policy, predicting that the Federal Open Market Committee (FOMC) will cut interest rates by 25 basis points, but will then release a more gradual easing signal. Barclays predicts that Federal Reserve Chairman Powell will announce that the FOMC may gradually slow down the pace of rate cuts after the December meeting, as he hopes to adopt a more neutral policy stance. The bank also expects Powell to mention that the US economy is growing steadily, the labor market is close to full employment, and that the risks of employment and inflation are broadly balanced. Barclays expects the FOMC to lower the federal funds rate target range by 25 basis points to 4.25-4.50% at the December meeting, bringing rates closer to the neutral level believed by policymakers. This is consistent with communications before the Fed's "quiet period" and does not overturn market expectations for rate cuts. The bank expects the December statement to reiterate that the committee believes the risks of achieving employment and inflation goals are broadly balanced, and will supplement the committee's plans to gradually shift to a more neutral policy stance. In the December Economic Forecast Summary, Barclays predicts that FOMC members will raise their US GDP and inflation forecasts, while lowering their unemployment rate forecast. The bank expects the dot plot to show a median forecast for the federal funds rate of 3.6% in 2025, indicating three 25 basis point cuts next year, but believes that the median showing two or three rate cuts is still subject to observation. Barclays believes the dot plot will show two more rate cuts in 2026, each by 25 basis points; one more rate cut in 2027, and the median forecast for the long-term federal funds rate will remain at 2.9%. The bank believes that the Economic Forecast Summary will raise economic growth and inflation forecasts, lower unemployment rate forecasts, and expect three rate cuts next year. However, Barclays maintains its baseline forecast that the FOMC will not cut interest rates more than twice in 2025.