Next week, the FOMC will meet. Sonia Meskin, an economist at Standard Chartered Bank (NY Branch), affirms they expect a 25bps cut in July and see an increasing risk of another 25bps cut in September.
Key Quotes:
“We expect the FOMC to lower the federal funds target rate (FFTR) by 25bps in July. We also see a growing prospect of a second 25bps rate cut in September (instead of December, our current forecast). We expect the description of the US economic situation in July’s statement to be broadly similar to that in the June statement.”
“The statement and the press conference are likely to note heightened uncertainty over the growth outlook and describe the 25bps cut as a pre-emptive move. It is also possible – though not likely, in our view – that either or both will go a step further, raising the possibility of a series of consecutive cuts.”
“If the commentary emphasises growth concerns (in the context of muted inflation), this would indicate to us that the Committee will favour a further ‘insurance’ cut and then will wait to see whether the economy (and inflation) responds – unless stronger evidence emerges of a significant slowdown in global growth and a consequent impact on the US economy.”
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