Quick Takeaways:
- Major banks now expect a Fed rate cut this week.
- Standard Chartered calls the move precautionary.
- Nomura sees dissent and forecasts more easing next year.
Banks Shift Toward a December Rate Cut
Wall Street began the week with a change in sentiment. Multiple key organizations that had anticipated a stable policy are now forecasting a rate reduction at the next Federal Reserve gathering.
Standard Chartered aligned with JPMorgan, Morgan Stanley, and Nomura in revising its forecast following an analysis of data showing a slowing U.S. Economy.
The bank now considers a 25-basis-point cut plausible. It emphasized that the recent government shutdown disrupted key data releases but called the potential move a prudent step to prevent further loss of momentum.
Why Analysts Reversed Their Forecasts
A softer November combined with guarded remarks from Fed officials pushed traders toward a more dovish stance. Nomura, which shifted early, believes the committee is weighing enough downside risk to justify acting now instead of waiting.
The firm even expects dissent inside the Federal Open Market Committee, with at least one member likely to push for a deeper reduction.
Nomura’s outlook also projects two additional cuts next year if central bank leadership changes. Former Trump adviser Kevin Hassett has emerged as a potential successor to Jerome Powell, creating new uncertainty around the long-term policy path.
Markets Seek Definitive Direction From the Fed
Investors are currently concentrating on Wednesday’s press briefing to gather insights into decisions. They seek information on the expected duration of easing and the circumstances that might halt it.
Hassett argued in a recent CNBC appearance that the Fed should avoid setting firm expectations when incoming data remains fluid. His caution explains why traders expect subtle messaging instead of explicit multi-month guidance.
Crypto Reacts to Shifting Liquidity Conditions
The rate-cut debate has also reached the digital asset market. Analysts note that the end of quantitative tightening and the prospect of easier conditions are already improving risk appetite.
André Chalegre, a digital markets specialist, said institutional interest often strengthens when liquidity expands. However, he warned that crypto does not always react instantly to policy shifts. Traders usually adjust their positions as they interpret the new environment.
The Fed additionally added $13.5 billion into the banking sector via overnight repos soon after ceasing QT on December 1. Several analysts interpret this action as an indication of more lenient liquidity management going forward.
As markets brace for the decision, both traditional and crypto investors are preparing for a week that could reshape expectations for 2025.