Fed Officials Play Down Rate Cut Sentiments - Forex News by FX Leaders
Fed Officials Play Down Rate Cut Sentiments

Fed Officials Play Down Rate Cut Sentiments

Posted Wednesday, February 26, 2020 by
Arslan Butt • 1 min read

Amid rising expectations in the markets for a rate cut by the Fed, Dallas Fed President Robert Kaplan has stated that it is too soon for the central bank to step in and react. In a recent report on the Wall Street Journal, Kaplan comments on the coronavirus and its impact on interest rates, stating, “it’s too soon to make a judgment about how it might relate to monetary policy.”

The Federal Reserve’s Vice Chair Richard Clarida also shared similar thoughts on the issue, confirming that the central bank is closely monitoring the situation but that it was too soon to assess whether it will have an impact on the US economy and how large the impact would be. Clarida also expressed confidence in the Fed’s current monetary policy and the state of the US economy, adding that both were “in a good place”.

In the past few days, US government officials have also stated that it was too soon to confirm weather the coronavirus outbreak would have any effect on the US economy. However the recent sell-off in global equity markets as well as weakness in treasury yields after more number of cases were reported from countries outside of China have raised speculation in markets that the outbreak could have a more severe impact on the global economy, leading to increased expectations for a rate cut by the Fed.

According to latest data from the CME FedWatch tool, markets are expecting the US central bank to cut rates up to three times this year. The odds of a rate cut by June now stand at around 44.6%, up from a 63% likelihood of no rate cuts until June.

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