Deutsche Bank: Fed won't cut rates next year

Deutsche Bank released a report on this week's FOMC meeting, which noted that the Fed meeting reinforced our basic view that the skip (rate cut) at the January meeting could turn into an extended pause (rate cut) in 2025. We continue to believe that the nominal neutral rate is around 3.75% and that it is necessary for the Committee to remain restrictive relative to that level. We therefore reiterate our view that the federal funds rate is likely to remain above 4 per cent next year, with the base case being no further rate cuts. The report also notes that some Fed participants have begun to incorporate the potential economic impact of President-elect Trump's policies into their forecasts, which could lead to higher inflation projections in 2025 and 2026. In terms of the labour market, Powell described it as solid, but noted that the current level of job creation is below what is needed to maintain a stable unemployment rate.