SINGAPORE (June 10): As trade disputes between the US and its trading partners worsen, there are widespread expectations in the market that the US Federal Reserve could cut interest rates. “We do not know how or when these issues will be resolved,” said Fed chairman Jerome Powell on June 4, referring to multi-front trade disputes from China to Mexico to India.
“We are closely monitoring the implications of these developments for the US economic outlook and, as always, we will act as appropriate to sustain the expansion, with a strong labour market and inflation near our symmetric 2% objective,” said Powell, who did not directly address rate cuts in his speech.
Eli Lee, head of investment strategy at Bank of Singapore, believes that one possible scenario is for the Fed to put forth a set of rate cuts of between 75 and 125 basis points as “insurance” against a downturn if the economic outlook weakens in the months ahead.
