Fed Rate Cut Likelihood Rises, Officials Play Down Possibility
With global stock markets continuing to fall on account of coronavirus worries, the likelihood of the Fed cutting rates has surged to 76%, as per latest estimates by CME’s FedWatch. Analysts expect a rate cut by as much as 0.75% by September in reaction to weakness driven by the spread of the coronavirus.
New infections are rising internationally at a rapid pace, even as China reports be cases at a slower pace than other regions. So far, most leading central banks have stated that it is too soon to estimate the extent of the impact of the virus and have expressed their interest to wait for a few weeks more before making an assessment.
Most bank and government officials worldwide remain optimistic that the economic impact of the outbreak could be short-lived and that the global economy would bounce back as soon as the spread was contained. However, in the case of the Fed, it also has to react to persistently low inflation rates within the US amid rising coronavirus concerns.
Unlike other leading central banks, the Fed still has ample room for further easing. For now, however, Fed officials maintain that the impact of the virus on the US economy could be temporary and limited.
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