- We anticipate one rate cut in 4Q24 (previous: three rate cuts) and four rate cuts in 2025 (unchanged), bringing the Fed Funds Rate to 4.00% by end-25. Rate cuts are less pronounced due to sticky inflation. The last mile for the deceleration of inflation is drawn-out due to tight labour markets.
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- DBS and OCBC provide 2025 dividend yields of 6.7% and 6.2% respectively. BUY OCBC, followed by DBS.
The front-runners in cutting rates.
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- Bank of Canada lowered its overnight rate by 25bp to 4.75% in Jun 24, the first G-7 country to cut interest rates.
- European Central Bank cut the interest rate on its main refinancing operations by 25bp to 4.25% in Jun 24.
- Unfortunately, the Fed is not able to follow suit in the near term.
The Fed adopting wait-and-see approach for rate cuts.
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