OCBC Bank: The Federal Reserve is expected to further cut interest rates by 50 basis points this year and 125 basis points next year

Singapore's OCBC Bank pointed out that although inflation has not been completely ruled out, a 50 basis point rate cut is not the norm. In our view, a further reduction in the US federal funds rate from now on does not require a recession. Our base case remains that the federal funds rate will be cut by 25 basis points at the November and December FOMC meetings, for a total of 125 basis points in 2025. We are biased to the downside on 2Y US Treasury yields. The next 2Y US Treasury yield level to watch is 3.83%, followed by 3.70%. On the 10Y US Treasury, we have been arguing in the past few weeks that it will be difficult for the real yield of the 10Y US Treasury to break through the 1.5-1.7% range without a series of weak data; now that the real yield of the 10Y US Treasury has broken through this range to 1.74%, it may take a series of weak data to push it back to the above range. (Jinshi)