The Fed should cut its rates twice this year: Why it's important

Wall Street expects the Federal Reserve to cut interest rates twice more this year to prevent the economic slowdown from the US-China trade war before borrowing costs remain stable in 2020.

Investors are currently predicting a 86 percent chance of a quarter-point basis cut at the US central bank meeting next week. But another 82% think there could be a modest third cut this year, either at the Federal Open Market Committee meeting in October or December.

"The combination of moderation in the global economy and increased trade-focused risks and a European recession is expected to lead to a reduction in FOMC rates in September, otherwise markets will be shaken and fears of a stronger domestic recession, "said Curt Long, chief economist of the National Association of Federal Credit Unions, said at the end of August.

The Fed lowered the federal funds benchmark rate in July for the first time in more than a decade, which led to questions about whether policymakers were at the beginning of a long time. rate reduction cycle. At the time, Fed Chairman Jerome Powell had cited "global economic developments and moderate inflationary pressures" as the reason for more accommodating monetary policy, with no however engage in additional discounts.

But in the months following this July meeting, the US economic outlook continued to darken. The tightly monitored rate curve has been reversed (an event that preceded a recession), August's lower than expected employment numbers suggest that the labor market is starting to stutter and manufacturing has declined for the first time in more than three years. The intensification of trade tensions between the United States and China has continued to shake global markets.

The Fed's decision was taken on September 18 at 2 pm AND will be followed by a press conference organized by Powell, which will probably inform the decision-making process of the decision-makers.

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