SINGAPORE (11 June): With the US Federal Reserve releasing a generally dovish message during its June Federal Open Market Committee (FOMC) meeting, Bank of Singapore (BoS) analysts Eli Lee and Conrad Tan expect no interest rate hikes over the next two years. The US central bank, they argue, wishes to avoid a possible Quantitative Easing (QE) temper tantrum and rate acceleration that could scupper risk asset price recovery. 

“We’re not thinking about raising rates. We’re not even thinking about thinking about raising rates,” insisted Fed chairman Jerome Powell in a post-meeting press conference. 

The Fed continues to expect a short recession and a long-drawn out recovery (L-shaped). The US economy is likely to contract by 6.5% in 2020 before growing 5% in 2021 and 3.5% in 2022. Unemployment is likely to be 9.3% in 2020 before dropping to 6.5% in 2021 and 5.5% in 2022. 

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