RBC Global Asset Management: Why a 'Hawkish' Fed Rate Cut May Be the Only One Despite Strong US Economy

Andrzej Skiba, Head of U.S. Fixed Income at RBC Global Asset Management, anticipates the Federal Reserve will implement an interest rate cut at its upcoming meeting. However, Skiba cautions that the robust U.S. economic momentum may render further rate cuts unnecessary.RBC's base assumption includes this rate cut, which Skiba describes as potentially a 'hawkish cut,' implying a subsequent pause in monetary policy adjustments. He elaborated, 'In our view, inflation and labor market data should prompt the Federal Reserve to hold steady after this initial rate cut, reassessing the economic situation early next year.'Market participants will closely monitor dissenting Federal Open Market Committee (FOMC) members, particularly those advocating for more aggressive reductions versus those who believe the U.S. economy doesn't warrant any cuts. Skiba further projected, 'Following this rate cut, and with our projection for accelerated U.S. economic growth in 2026, the necessity for further rate reductions may dissipate. For political reasons (such as a potential Federal Reserve leadership change in May), we might see one rate cut, but the economy itself may not require another cut for a foreseeable period.' This analysis was initially reported by financial news outlets.