How soon can we expect the Fed to potentially cut rates?   


20 June 2019 : Persistent uncertainties around the global economic outlook and muted inflationary pressures are already presumed to have encouraged at least one voting member of the Federal Reserve, such as James Bullard, to cut interest rates this month. Expectations are high that the anticipated interest rate cut from the Fed could occur as early as July, but there is the possibility that it might not occur as soon as financial markets are hoping for. 

 

It must also be kept in mind that a rate cut in July is contingent on the outcome of the G20 meeting between US President Donald Trump and Chinese President Xi Jinping.


If the United States and China do find a resolution to the long-standing trade tensions, this will cause a rapid shift in the economic outlook and could even mean that the Federal Reserve throws the keys to lower US interest rates out of the fast-moving car.  


The bottom line is that should the G20 meeting in Japan end on a positive note, with US-China relations improving and stronger US economic data emerging, the Fed is unlikely to push the button on lower interest rates.

This is a potential outcome that can very well become frightening and represent a significant risk to global equity markets, when considering how confident everyone has become today that the Fed will be cutting US interest rates.


Source : Lukman Otunuga, FXTM Research Analyst 


Reporting for EasyKobo on Thursday , 20 June 2019 in Lagos, Nigeria


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