Financial giant ING has predicted that the Federal Reserve will start cutting interest rates in the second quarter of next year. “We are currently forecasting 150bp of rate cuts in 2024 with a further 100bp in early 2025,” ING’s chief international economist detailed, noting that U.S. economic data confirmed that there’s “no need for any further Fed policy tightening.”

ING’s Fed Rate Cut Prediction

Global financial services firm ING’s chief international economist, James Knightley, published an article last week outlining why he expects the Federal Reserve to start cutting interest rates next year.

Citing U.S. data showing modest growth, cooling inflation, and a cooling labor market, the economist emphasized that it’s “exactly what the Fed wants to see.” He described:

This should confirm no need for any further Fed policy tightening … We expect rate cuts from the Fed from the second quarter onwards.

“We are currently forecasting 150bp of rate cuts in 2024 with a further 100bp in early 2025,” he noted.

The ING economist highlighted that initial jobless claims rose to 218k last week, emphasizing that “the trend is certainly towards higher continuing claims while initial claims remain low.” He added: “Essentially, the message is that firms are reluctant to fire workers, but they are less inclined to hire new workers. i.e. more evidence of a cooling, but not collapsing, labor market.”

Knightley then explained that inflation pressures are “moderating more broadly,” citing the October personal income and spending report showing both incomes and the Core PCE deflator rising 0.2% month-on-month. This means “the annual rate of core inflation slowed to 3.5% from 3.7%, as expected,” he stated.

The economist described spending as holding up, but cautioned that the outlook is “deteriorating.” Noting that “Credit card delinquencies are on the rise while student loan repayments are only adding to the financial pressure on millions of households,” he warned:

The weakness in real household disposable incomes … remains a key concern for growth in the early part of 2024.

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