TD Securities Postpones Expected Next Fed Rate Cut from March to June, Expects Three Actions This Year

Economists at TD Securities have postponed their forecast for the next Federal Reserve rate cut from March to June, following the release of robust US employment data on Wednesday. TD still expects the Fed to cut rates by a total of 75 basis points this year, bringing the terminal rate to 3%, with 25 basis point cuts projected for June, September, and December.

The team, led by Chief US Macro Strategist Oscar Munoz, wrote in the report that the anticipated policy easing is not due to deteriorating economic conditions, but rather a result of monetary policy “normalization” as inflation gradually returns to target levels.

They also stated that improved employment prospects should allow the Fed to shift its focus to the inflation target and to progress on expected inflation in 2026.

TD Securities noted that US Treasury yields are likely to continue declining this year, expecting the 10-year yield to fall to 3.75% by year-end; previously, they had forecast a steeper drop to 3.5%.

However, in the near term, before obtaining “more information on the health of the economy,” they expect the 10-year yield to remain in the 4.10% to 4.30% range.

They also stated that the US Treasury yield curve “should be near its steepest level and gradually flatten,” favoring 2s10s flattening trades.

Editor: Li Tong