Union Bank of Switzerland’s analysis team suggests that a slowdown in the US economy, reflecting the disruption to the manufacturing sector caused by the trade spat with China will rein in the Fed in the near term.
“A partial government shutdown has exacerbated the situation. The US federal government was shut down from 22 December 2018 to 25 January 2019. The economists are also expecting a sharper slowing in the economy in 2020 than the Federal Open Market Committee (FOMC) does to 1.7 percent versus the FOMC’s 1.9 percent.”
“These factors will keep them on hold both this year and next,” the CIO team says. “That said, we see the bar for a rate cut —which the market has priced – as very high and a rate cut as unlikely.”