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According to analysts from Danske Bank, the economic situation is worse than when Federal Reserve Chair Powell changed direction in June of last years. Their base case is for a rate cut in April. 

Key Quotes: 

“Although the coronavirus has spread to more countries and equities are now more than 7% down, the Fed has yet to move in a more dovish direction.”

“Looking at nearly all metrics, the economy is in worse shape than in June 2019. This means we should expect the Fed to shift soon in a more dovish direction and investors are right in pricing in cuts, in our view.”

“The Fed’s blackout period ahead of the 17-18 March meeting begins on 7 March and since none of the most important FOMC members (as of today) is scheduled to speak before, the dovish shift may not occur until the meeting (in the statement or at the press conference). Otherwise we believe a shift will occur after the March meeting, mirroring the radical U-turn the Fed made in early January 2019 after the hawkish meeting in December 2018 amid a longer risk-off period.”

“Our base case is still a rate cut in April.”