DEUTSCHE BANK: Cut in December, Pause of 9 Months and... New Leader in the Fed in 2026? The Dare Forecast That Challenges Consensus

[Igor Pereira]

While the market is struggling with the "minutes of chaos" of the Fed and the historical division between its members, the Deutsche Bank has just reiterated its macroeconomic forecast with surprising clarity. They are not just betting on the short term; they are drawing a political and monetary scenario for the next two years that challenges the current consensus.

By Igor Pereira, Financial Market Analyst, Junior Member WallStreet NYSE

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1. December Is Confirmed (In Their View)

Despite all the noise and mixed comments from Fed members (some focused on inflation, others at work), Deutsche Bank remains unwavering:

• Prediction: The Fed will cut the fees at 25 basis points (bps) at the December meeting.

• Why? They see the underlying weakness of the labour market and the need to "calibrate" the policy for the neutral (the Powell's "Cut and Safe" strategy we discussed) as the decisive factors that will overcome inflationary fears.

2. The Great Pause of 2026: The Long Money Winter

Here is where the forecast becomes fascinating and divergent:

• The Scenario: After the December cut, Deutsche Bank expects the Fed to enter a prolonged pause, keeping the rates unchanged throughout the first half of 2026 until third quarter (Q3).

• Implication: This suggests that they believe that the December cut will be enough to stabilize the economy for a while, or that inflation will prove stubborn enough to prevent further rapid cuts. It's a long-term "wait to see" scenario.

3. The Political Bomb: New Leadership in the Fed in 2026?

The boldest part of the forecast is politics:

• Next Cut: They anticipate another 25 bps cut just on September 2026.

• The Catalyst: And here's the key: they expect this cut to occur. "under the new leadership of the Fed".

My Analysis (Igor Pereira): That's explosive. Jerome Powell's term as president ends in May 2026. Deutsche Bank is effectively predicting that Powell will not be renewed. and that a new president (potentially more dovish or politically aligned with the new administration after the elections of 2024) will take over and resume the cycle of cuts at the end of 2026.

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Conclusion of Igor Pereira: A Guide to Uncertainty

Deutsche Bank's roadmap provides a clear framework for navigating current uncertainty:

1. Short Term (December): Bet on the cut. Powell's Fed's gonna push it. (Positive for Gold/Titles, Negative for Dollar).

2. Medium-term (H1 2026): Prepare for a period of stable rates ("higher for longer" than the market expects now). This can bring volatility and a return on dollar strength if the market has to prioritize the withdrawal of cuts scheduled for the beginning of 2026.

3. Long-term (H2 2026): The great political and monetary change will come at the end of the year, with a new leadership in the Fed resuming flexibility.

This forecast reinforces the need to be tactical in the short term, but to maintain the long-term strategic vision. The cycle of monetary loosening is just beginning, but the path will be full of pauses and political twists.

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