With Recession Risks Low, Will the Fed Still Cut Rates?
Despite the still low risk of recession in the US, money markets are expecting the Fed to cut interest rates in September, as highlighted in our chart by the current levels of our proprietary US Growth Nowcaster. This would not be the first such occurrence. In 1995, in the midst of a severe slowdown in growth momentum across many emerging economies, the Fed made the decision to lower its target rate. The aim was to smooth the influence of these external risks on the US economy. Will this time be different? While inflation risk remains largely under control, the Fed needs to accommodate the consequences of a trade war.
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