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FOMC seen cutting rates in September, October and December – UOB

Researchers at UOB Group now see the Federal Reserve reducing the upper end of the FFTR to 1.5% by year-end.

Key Quotes

“The intensification of the US-China tariff fight in 3Q took us by surprise and the worsening trade policy development will likely “push” the Fed to take on more “insurance” rate cuts in 2019″.

“We now expect the Fed to cut the FFTR by another 25bps in the 17/18 Sep 2019 FOMC. We also project two more 25bps “insurance” rate cuts in the 29/30 Oct and the 10/11 Dec FOMC, bringing the upper bound of the FFTR lower to 1.5%, well below the 2% inflation target“.

“We have not priced in further cuts in 2020 and our base case is for some sort of US-China trade deal happening in 1H 2020. However, if trade tensions persist well beyond 2019, then we think the Fed will have to take on more “insurance” easing, especially if it leads to material downside impact to US and global growth”.

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