Amid Trade Tumult, Goldman Sachs Now Sees Two More Interest Rate Cuts This Year

Amid Trade Tumult, Goldman Sachs Now Sees Two More Interest Rate Cuts This Year

With the prospects of a trade deal between the U.S. and China now appearing dimmer than ever, the global economy could be in for a rocky ride—and that could force the Federal Reserve’s hand when it comes to monetary policy, according to Goldman Sachs . The Wall Street investment bank has revised its interest rate outlook in the wake of President Trump’s announcement that the U.S. will impose a new 10% tariff on $300 billion worth of Chinese imports. That news sent the markets spiraling on Monday, and Goldman analysts believe it will spur the Fed into slashing rates as many as three times over the course of this year. The Federal Open Market Committee (FOMC) cut interest rates for the first time in a decade last month, and Goldman had already anticipated yet another round of quantitative easing later this year. But the bank now expects a further two cuts through 2019—forecasting a 75% chance of a cut of 25 basis points in September, and a 50% of an additional cut of 25 basis points at the Fed’s October meeting. With the Trump administration reverting to a hard-line stance in trade negotiations with China, and the Treasury Department officially labeling Beijing a currency manipulator on Monday, Goldman says it now believes that “no [trade] deal will be reached before the 2020 election.” “While we had previously assumed that President Trump would see making a deal as more advantageous to his 2020 re-election prospects, we are now less confident […]

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