UOB Forecasts Gradual Easing Cycle with December Rate Cut

The Federal Reserve is expected to continue its gradual easing cycle, with a 25-basis-point rate cut in December and further reductions in 2025, according to UOB Group's latest assessment.

UOB's economists project a 25bp cut at the December Federal Open Market Committee (FOMC) meeting, followed by additional cuts in the first half of 2025. This outlook is based on the Fed's dual mandate of maximum employment and price stability, with inflation gradually trending toward the 2% target.

Financial markets have been pricing in a high probability of a December cut, but the pace of subsequent easing remains a point of debate. UOB's view aligns with a 'higher-for-longer' narrative being replaced by a 'gradual normalisation' scenario. For investors, this suggests a supportive environment for risk assets, though bond yields may remain range-bound as the Fed communicates its data-dependent approach.

The Fed's policy path directly influences global borrowing costs, currency valuations, and capital flows. A gradual easing path could translate into lower mortgage rates and cheaper corporate financing, while savers may see reduced yields on deposits.