BMO: Fed to cut rates by 25bp, 3 times this year

Canada Bank of Montreal expects the Fed to cut rates by 25bp. Powell previously said, “The way forward is clear, and the timing and pace of the cut will depend on upcoming data releases, the evolving outlook, and the balance of risks.” We suspect there will be something similar in the policy statement. Of course, the market will need some stronger statements, if only to adjust current pricing, and September's economic forecasts and their “dot plot” will be critical. The dot plot will likely show a total of three rate cuts this year, with some participants expecting at least 100 basis points this year. A rate cut of 125 basis points is expected next year. However, for both reasons, the forecast for 2026 is more uncertain. The long-term or “neutral” level could be raised.