Major institutions broadly expect the Fed to hold at the upcoming FOMC, but
forecasts diverge sharply on subsequent direction and timing. No-cut/steady
camp: Moody’s, Nomura, JP Morgan, Wells Fargo and BNY Mellon see a hold as
baseline and deem near-term cuts unlikely; JP Morgan and others expect policy
language to shift from easing-leaning toward neutral. Moody’s warns
re-accelerating inflation expectations could prompt hikes. BNY Mellon expects
the statement to signal two-way rate risks and to remove prior 2026 cut
expectations; it does not expect any moves this year. Cut camp: Goldman expects
a hold but will remove easing-leaning forward guidance and projects two 25bp
cuts in June and December 2027. UBS expects the Fed to drop a dovish tilt yet
still forecasts 25bp cuts in March and June 2027. Citi projects three 25bp cuts
in September, October and December. Deutsche Bank expects the Fed to abandon
easing language and beginning cuts from mid‑next year, totaling 75bps by end‑2027.
Hike/insurance-hike camp: Capital Economics and BNP Paribas see a real risk of
precautionary hikes (Capital Economics flags two potential “insurance” hikes
around December/early next year; BNP Paribas sees the earliest hike in
December). Deutsche Bank flags rising upside risk to rates. PGIM expects the Fed
to hold now but projects three hikes this year, three cuts in 2027 and one cut
in 2028, with a terminal rate around 3.375%. Other notes: Barclays, BofA and ANZ
also expect a hold and say the Fed will likely delete easing-leaning language in
the statement; BofA expects potential tweaks to employment wording, ANZ expects
a renewed 2% inflation commitment. Mitsubishi UFJ says the meeting’s market
importance is driven mainly by forward guidance. Asset manager MFS expects a
hold with signals of a neutral stance and possible changes to communication
tools (less use of the dot plot, fewer/shorter press interactions).
