Citadel Securities: The Fed is expected to cut interest rates by only 25 basis points this year

Citadel Securities said a strong U.S. economy and stubborn inflation will lead the Federal Reserve to only cut interest rates once more in 2024. "I will go out on a limb and say we'll end up seeing only 25 basis points of rate cuts over the rest of the year," Michael de Pass, global head of rates trading at Citadel Securities, said in an interview. The market "is still implying a 50 basis point rate cut this year. When we look at it, that number is a little too high, both in terms of the strength of the underlying economy and the stickiness of inflation." After strong U.S. job creation data in September, swap traders have lowered their expectations for further Fed rate cuts, now expecting about 47 basis points of rate cuts by the end of 2024. Before the jobs report, they expected about 75 basis points of rate cuts by the end of the year. Michael de Pass said the adjustment makes sense, but is still too aggressive. (Jin Shi P)