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The Federal Reserve is expected to lower interest rates significantly after its two-day meeting on Wednesday.
A rate cut would be the Fed's second participation in the same number of meetings as it would aim to maintain the longest economic expansion ever recorded up to the twelfth year.
"The Fed is likely to cut 25bps at this week's meeting and guide further rate cuts," New York-based economists at Bank of America Merrill Lynch said Monday. "The meeting should have a dovish tone. However, in our opinion, the big question is whether President Powell continues to call the easing cycle a "mid-term adjustment". "
Recent economic data have eased somewhat, with the US-China trade war in its second year. The US economy grew at an annualized rate of 2% in the second quarter, down from 3.1% in the previous quarter. US manufacturing and employment data also showed signs of slowing.
President Trump is well aware of the importance of a strong economy for his chances of reelection. He repeatedly attacked the central bank, asking him to cut rates to revive the economy.
"The United States, because of the Federal Reserve, is paying a MUCH higher interest rate than other competing countries," tweeted Trump on Monday.
"They can not believe how lucky they are that Jay Powell and the Fed do not have a clue, and now, on top of all this, the oil has hit, lower interest rates, more stimulus!"
Trump is not the only one to claim a significant rate cut.
St. Louis Fed President James Bullard, a voting member, said earlier this month that a disproportionate 50 basis point reduction was needed to exceed market expectations and mitigate the effects of the trade war between the United States and China.
Nevertheless, CME traders expect a 65.8% probability that the Fed will cut rates by 25 basis points on Wednesday, up from more than 90% last week. They see zero percent chance of a 50 bp cut.
In July, the Fed lowered interest rates for the first time in more than a decade because of low inflation and uncertainties in the global economy. The minutes of the July meeting showed Fed officials that they saw the rate cut as a "mid-cycle adjustment" and wanted to avoid giving the impression that they were following a "pre-arranged course". .
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Even without a 50 basis point cut at Wednesday's meeting, the Fed should continue to cut rates before the end of the year.
"Beyond the September meeting, we continue to expect the FOMC to provide a third and final 25bp reduction to 1.5-1.75% in October," a research team wrote on Friday. Goldman Sachs economy.
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"A total realignment of the key rate of 75 basis points seems to be roughly equivalent to a" mid-cycle adjustment "based on the model of the 1990s envisioned by Fed leaders: a moderate response to moderate concerns growth risks and moderate inflation.
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