04:59 PM EDT, 09/19/2024 (MT Newswires) -- The Federal Reserve (Fed) implemented a larger-than-expected 50 basis points rate cut, lowering the upper bound of the target range from 5.5% to 5.0%, and expects an additional 50bps cut by year-end with a further 100bps in 2025, Stifel said in a note Thursday.

Inflation is not expected to fully reach the Fed's 2% target until 2026. For 2024, the headline PCE inflation forecast was lowered to 2.3%, and core PCE inflation was revised down to 2.6%, Stifel said.

The Fed projected ongoing growth at a solid pace, revising GDP growth for 2024 down to 2%, while keeping the projections for 2025 and 2026 at the same 2% pace. The newly added forecast for 2027 also suggests a 2% growth rate, according to the note.

Despite the significant rate cut, the Fed struck a somewhat hawkish tone, indicating that inflation pressures remain elevated, but with increasing confidence that inflation is moving toward the 2% target, it added.

The dot plot revealed expectations of two more rate cuts by the end of 2024, although there was division among officials, with some anticipating fewer or more cuts. By 2027, the Fed expects an additional 200bps in cuts, reaching a terminal rate of 2.9%, the analysts noted.

On Thursday, the Philly Fed Business Outlook Index rebounded from -7.0 to +1.7 in September, reflecting improved business conditions. However, new orders weakened, falling to -1.5, Stifel analysts noted.