Standard Chartered’s analysts predict a high probability of another rate cut in January, as the labour market is expected to moderate.

Standard Chartered, a bank, believes that the Federal Reserve will cut interest rates on Wednesday, but the cut will be less aggressive than the market expects. The bank predicts that the Fed will continue to cut rates in January, citing ongoing softness in the labor market. Labor market data is expected to show further softness, which would justify another rate cut. The bank notes that a higher unemployment rate or nonfarm payrolls growth of 125,000 or less could also prompt a rate cut in January. However, Standard Chartered expects the Fed to wait until at least March to make a significant change to monetary policy. The bank’s summary projections expect the federal funds rate to end 2025 at 3.625%, with a potential drop to 3.125%. While the bank believes rate cuts are likely, the timing and extent of future cuts may be more measured than the market anticipates.