Deutsche Bank: The Federal Reserve will not cut interest rates next year

Deutsche Bank has released a report on this week's FOMC meeting, which notes that the Fed meeting reinforces our underlying view that the skip (rate cut) at the January meeting could turn into an extended pause (rate cut) in 2025. We continue to believe that the nominal neutral rate is around 3.75% and it is necessary for the committee to remain restrictive relative to that level. We therefore reiterate our view that the federal funds rate is likely to remain above 4% next year, with no further rate cuts in the base case. The report also notes that some Fed participants have begun to factor in the potential economic impact of President-elect Trump's policies into their projections, which could lead to higher inflation projections for 2025 and 2026. In terms of the labor market, Powell characterized it as solid, but noted that the current level of job creation is below what is needed to maintain a stable unemployment rate.