Analysts at UOB, point out that after the FOMC minutes, their outlook for the Federal Reserve remains the same: no more rate hikes.
Key Quotes:
“Post-FOMC minutes, market rate cut expectations in the Dec 2019 FOMC was little changed at 55%, based on trading in futures and options data compiled by Bloomberg (WIRP) (as of 10 Apr 2019). And the latest FOMC minutes if anything, further reinforces the Fed’s patience approach, so we maintain the view that the Fed is done with the current rate hike cycle. The peak of the FFTR range will be 2.25%-2.50% which is where we are right now (since Dec 2018).”
“We currently forecast US GDP growth to slow to 2% in 2019 (from 2.9% in 2018) and could slow further into 2020, potentially hitting a technical recession (i.e. 2 consecutive quarters of sequential q/q declines) that year. But it is important to note that the technical recession will be mild and comes off the heels of a very long business upcycle. We expect the Fed to CUT policy rate by a nominal 25bps cut in 3Q 2020 and will leave the door open to do more if the slowdown (especially externally driven) is exacerbated. A major caveat to this projection is that US inflation stays in check (around 2%) despite wage growth above 3% since Oct 2018.”
“The next FOMC policy meeting will be on 30 Apr/01 May 2019 (decision on 2 May 2019, 2am SGT) and will be accompanied by a press conference by Fed Chair Jerome Powell, but without any updated Summary of Economic Projections.”
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