JPMorgan Chase has voiced concerns over Wall Street's optimistic projections regarding net interest income (NII) for 2025. During a recent conference, Chief Operating Officer Daniel Pinto highlighted that the consensus estimate of a $1.5 billion annual decline, bringing NII down to $90 billion, may not fully account for the anticipated interest rate cuts expected from the Federal Reserve in the coming months. Pinto noted that according to a Capital IQ transcript, with the Federal Reserve likely to reduce benchmark rates by a total of 250 basis points, the real NII could be lower than market expectations. Current financial market analyses suggest a federal funds rate target range of 3% to 3.25% by the end of 2025, a significant drop from the existing range of 5.25% to 5.50%, as outlined in a recent report from Wells Fargo Investment Institute. Despite the uncertainty, JPMorgan's leadership has chosen not to provide an official revenue guidance for 2025, which led to a notable decline in shares by 5.1% during afternoon trading following Pinto's remarks.
Nevertheless, the bank reaffirmed its 2024 guidance for NII at $91 billion, with market consensus estimating around $91.33 billion for the current year according to Visible Alpha. The central bank's Federal Open Market Committee (FOMC) has significantly raised its benchmark lending rate over the past year, totaling 525 basis points from March 2022 to July 2023, in a strategic move to combat inflation.
However, the committee has notably stabilized monetary policy in recent months. Currently, traders are assessing the likelihood of a rate reduction on September 18, with the odds of a 25 basis point cut now at 67%, down from 70% the previous day. Conversely, expectations for a larger 50 basis point cut have increased to 33%, a rise from 30%. Moreover, Fed Chair Jerome Powell indicated last month that the moment to ease monetary policy has arrived, a sentiment echoed by New York Fed President John Williams, who recently stated that it is now reasonable to transition to rate cuts as inflation trends towards the 2% target. Recent government data revealed that the U.S.
economy created fewer jobs than anticipated in August, yet the unemployment rate has seen a slight decrease, further complicating the economic landscape for the Federal Reserve as it contemplates the next steps in monetary policy..