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Christian Nolting, managing director in charge of investments at Deutsche Bank Wealth Management, predicted that the Federal Reserve will lower its interest rates twice in the next 12 months, but the likelihood of a reduction in rates to four times are smaller.
Chicago Fed President Charles Evans said this week that even two rate cuts may not be enough in the long run, given the lingering weakness of inflation and global trade tensions.
"Market prices in four cuts, I think it's a little too much … they (the US Federal Reserve) should not use all their firepower immediately," Nolting told "Squawk Box" from CNBC on Wednesday.
Nolting predicted a 25 basis point cut by the end of July – what he called "reduced insurance or preventative reduction" in the face of weaker economic growth.
While traders are counting on a 100% probability of interest rate cuts, according to CME's FedWatch tool, the opinion remains divided on the extent of easing. 28.7% of merchants currently expect a more aggressive discount of half a percentage point.
But Nolting proposed that the key to curbing the economic downturn is whether the Fed, which aims to inflation by 2%, is able to raise consumer prices.
The Fed follows the basic index of personal consumption expenditure prices for monetary policy. This index rose 1.5% in May from the previous year and was below target this year.
However, US consumer prices for the month of June – which excludes volatile prices for fuels and food products – recorded the largest increase since January 2018, up 0.3%. In the last 12 months of June, it rose 2.1%.
The overall CPI edged up 0.1% last month, rising 1.6% from one year to the next in June.
US retail data released on Monday, however, could boost confidence. US retail sales were up 0.4% in June, higher than the 0.1% expected by economists polled by Reuters.
This suggests a high consumption that could offset the recent weakness of business investment.
Nevertheless, investors expect the US Federal Reserve to lower interest rates in the trade dispute with China, which would have exacerbated the global slowdown. Lower interest rates stimulate the economy as they reduce the cost of borrowing to finance investments in various badets.
– Reuters contributed to this story.
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