The Fed to cut rates two more times by the end of the year

The tone and substance of the press conference after the July 31st meeting showed that the Fed is getting more concerned about the global economy and trade uncertainties, which have intensified over the last days.

Highlights:

  • The tone and substance of the press conference after the July 31st meeting showed that the Fed is getting more concerned about the global economy and trade uncertainties, which have intensified over the last days.
  • This and the deterioration shown by the latest economic indicators lead us to update our Fed call. We keep continue to expect another 25 bps cut in September but bring forward to Q4 the final 25 bps cut we projected for the beginning of 2020.
  • A cut at the December meeting still seems more likely than one in October, as it would come in conjunction with a new set projections. Risks remain tilted to bolder accommodation, though.

Download the full publication below

THE FED TO CUT
RATES TWO MORE
TIMES BY THE END OF
THE YEAR

RELATED INSIGHTS

US INFLATION: RISING, NOT SOARING
Since the beginning of the year financial markets have started increasingly to worry about a sudden and strong re-turn of US inflation. Behind this stands the double boost from domestic demand coming from the widely expected re-opening of the economy in spring and the large fiscal stim-ulus the incoming Democratic administration will most likely deliver.
CHINA’S Q4 GDP GROWTH SURPRISED ON THE UPSIDE, BUT RISKS TO THE OUTLOOK HAVE INCREASED
This morning, China published its Q4 GDP growth alongside with December monthly activity data. Q4 growth accelerated to 6.5% yoy which lifted total 2020 GDP to 2.3%. December real activity data were more mixed. While exports came in strongly, important domestic demand components were a bit unsteady.
COVID-19 FACTS & FIGURES
US President-elect Joe Biden has unveiled a $1.9 trillion stimulus package proposal. Following the recent increase in cases, China has imposed new restrictions and lockdowns in the Hebei province. Canada has implemented new restrictions and a provincewide curfew in Quebec that will last until February 8. German Chancellor Angela Merkel warned that the recent rise in Covid-19 cases could force the country to prolong the nationwide lockdown until April.