Major Banks Expect A 25 Bps Fed Rate Cut: Full Breakdown Of Predictions

What Are Banks Expecting From the Fed?

Most global banks are aligned on one point: the Fed is likely to deliver a 25 bps rate cut. However, their expectations differ when it comes to dissenting votes and the tone of the statement.

1. Natixis Corporate & Investment Banking

Prediction: A 25 bps cut to around 3.75%.
Vote Expectation: A strong majority will back the cut, but a few members may dissent.
View: Investors should expect a supportive tone but with caution about future cuts.

2. BNY (BNY Mellon)

Prediction: A rate cut is “almost assured.”
Key Focus: The press conference and the Fed’s updated economic projections (SEP) will matter more than the cut itself.
Why It Matters: The SEP will signal how many rate cuts the Fed still sees ahead.

3. Goldman Sachs

Prediction: A “hawkish” 25 bps cut, likely landing in the 3.5–3.75% range.
Vote Expectation: Two hawkish dissents.
Interpretation: The Fed will cut but also warn that inflation risks remain.

4. Bank of America (BofA)

Prediction: A standard 25 bps cut.
Guidance: The Fed may shift to a slightly hawkish tone in its statement.
Vote Expectation: Up to three dissents.

5. Wells Fargo

Prediction: A 25 bps cut to 3.50–3.75%.
Internal Assessment: The FOMC is now “increasingly split,” with multiple dissents likely.
Market Read: A divided committee may slow down future cuts.

6. MUFG

Prediction: A 25 bps cut.
Tone: The decision will be presented as a “close call.”
Future Path: Expect a higher bar for any additional rate cuts.

7. Morgan Stanley

Prediction: A 25 bps cut.
Future Cuts: They expect more cuts in December, January, and April.
Policy Signal: The Fed’s “recalibration phase” is now complete.

Markets Worry More About Fed Guidance Than the Rate Cut

Markets are almost sure the Fed will cut rates by 25 bps today, with Kalshi showing a 97% chance. But the bigger worry is what the Fed will say about 2026. In September, the Fed expected only one cut next year and a 3.4% rate by the end of 2026. Analysts think the Fed may sound neutral or slightly hawkish again, which could put pressure on stocks.

Powell will likely repeat that more cuts will only happen if inflation falls further or unemployment rises. His term ends in May, so today’s decision and press conference will be watched very closely.

Fed May Cut Rates and Increase Bill Purchases

The Federal Reserve is expected to cut interest rates to 3.50%–3.75% on Wednesday. Bank of America also thinks the Fed may start buying about $45 billion in short-term Treasury bills each month to maintain bank reserves and avoid liquidity stress.

With MBS reinvestments included, total bill purchases could reach around $60 billion per month. These buys are not QE—they’re meant to keep money markets stable, not boost lending. While some may call it money printing, the move could help calm markets as Treasury supply rises and liquidity concerns grow.

Why Does This Rate Cut Matter?

This rate cut is important because it will set the tone for how the Fed plans to manage growth and inflation heading into the next year. A hawkish or cautious tone may: