Deutsche Bank: The Fed rate cut may be lower than market expectations

Deutsche Bank pointed out in a report that the futures market predicts there will be five to six rate cuts this year, with the Fed funds rate expected to drop by over 100 basis points by the end of the year. However, interest rates may not decline as significantly as forecasted. Deutsche Bank analyst George Saravelos stated that the current economic situation is similar to that of 1995, with artificial intelligence technology driving a new productivity cycle. The sensitivity of the US economy to interest rates has greatly decreased, and the rate cut may be lower than market expectations. Saravelos explained that in a soft landing scenario, it would be reasonable for the Fed to cut rates to a nominal neutral level - one that neither restricts nor expands economic activity - but no one knows what this theoretical rate level is. Given this uncertainty, it is likely that the Fed will repeat what happened in 1995 when they cut rates by 75 basis points instead of meeting expectations for over 100 basis points reduction.