The Fed will cut rates in March
the market predicts
By Anneken Tappe, CNN BusinessꀊUpdated 4:39 PM EST,
Fri February 28, 2020
https://reurl.cc/D1NrOj
New York(CNN Business)Central banks around the world are closely monitoring th
e novel coronavirus outbreak, and investors believe they will step in to keep
the world's economies humming.
Stocks have been selling off all week, even briefly fell into correction Thurs
day, as investors and economists grow increasingly concerned about the virus'
impact on global supply chains and trade.
That helped sent market expectations for interest rate cuts through the roof.
TheME's FedWatch Tool澵hows a 100% chance that the US Federal Reserve will c
ut rates in March. The markets priced in an 11% chance of that a week ago.
The probability of a standard quarter-percentage-point cut on Friday was overt
aken by expectations for a half-point cut at the Fed's next monetary policy me
eting on March 18. The probability of the latter was 52% at Friday's close, do
wn from nearly 92% earlier in the day.
The likelihood of a bigger rate cut shot through the roof later in the day, af
ter Fed Chairman Jerome Powell tried to氲ounter濳he market's expectations with
a statement: "The fundamentals of the US economy remain strong," Powell said.
He added that the central bank was monitoring the outbreak and its economic im
plications, and will "act as appropriate to support the economy."
Even though the meeting date is less than three weeks away, the central bank c
ould meet earlier for an emergency rate cut, said analysts at Bank of America
Merrill Lynch. The溻ast emergency rate cut濳ook place in 2008.
BofA also expects a half-percentage-point cut, citing disorderly market moves
and a possible demand shock as a result of the virus outbreak. It said last ye
ar's "insurance" rate cuts could serve as a blueprint.
But the Federal Reserve might not be as quick to jump on the monetary easing w
agon as investors would like.
Neel Kashkari and Loretta Mester, presidents of the Minneapolis and Cleveland
central banks, respectively, both said Monday there was no immediate need to c
ut interest rates. James Bullard, President of the St. Louis Fed, said the cen
tral bank probably wouldn't cut rates unless the outbreak escalates.
"Further policy rate cuts are a possibility if a global pandemic actually deve
lops with health effects approaching the scale of ordinary influenza, but this
is not the baseline case at this time," he said at the Fort Smith Regional Ch
amber of Commerce on Friday.
After all, the economic consequences of the virus outbreak have yet to be refl
ected in the US economic data that the Fed watches so closely. Large multinati
onal companies like孭ppleꀨAAPL)乸nd𠮶icrosoftꀨMSFT)温ave烀arned about how th
e outbreak will hurt on their businesses, but America's economy as a whole isn
't all that reliant on trade and exports, which shields it somewhat from globa
l economic woes. That means the Fed might not have reason to act yet.
Even though啫ed cut rates three times溻ast year to stimulate the economy, it i
s still above the ultra-low rates from the financial crisis. The benchmark rat
e now sits at 1.5% to 1.75%.
"The Fed is probably the central bank with the most room to cut, so it's almos
t rational to price in more action," said Ilan Solot, currency strategist at B
rown Brothers Harriman, of the heightened expectations for lower rates.
Last year's cuts came on the coattails of the US-China trade war, which weighe
d on investor and business sentiment.
"The coronavirus has taken the baton from the trade war," said Brian Nick, chi
ef investment strategist at Nuveen, adding that the virus outbreak is affectin
g similar assets and industries as last year's trade war did.
Are rates already too low?
But some investors are skeptical if monetary policy is the right tool to help
combat the fallout from the outbreak.
"There is nothing that will be 'stimulated' monetarily from a rate cut or two
that isn't already being 'stimulated' by the very low rate environment," said
Peter Boockvar, chief investment officer at Bleakley Advisory Group. "And rate
cuts aren't a vaccine and won't bring factories back and people traveling aga
in."
Similarly, the European Central Bank might not be the right authority to step
in to stimulate the export-reliant European economy. The ECB still has not rai
sed its benchmark interest rate since slashing it during theꀲ010-2012 Europea
n sovereign debt crisis. While the bank might cut other interest rates, alread
y-low rates could mean European countries will combat any economic fallout fro
m the virus outbreak with fiscal rather than monetary stimulus, said Marc-Andr
e Fongern, head of FX research at Fongern Global FX.
US Treasury yields, which are an expression of future interest rate expectatio
ns, have been sliding this week, with the 10-year government bond yield fallin
g below 1.29% to a fresh record low. Bond yields and prices move opposite dire
ctions.
"In my opinion in the US, there's a conflation between hedging and the actual
pricing in" of interest rate cuts, Solot said.
Fixed-income products like Treasuries are a common hedge for stock investors.
Given the sharp selloff in stocks, the rally in bonds and consequently lower y
ields might be driven by more than just rates expectations.
In the developing world, the picture looks slightly different.
China, where the outbreak originated, is expected to feel the most economic pa
in as businesses and factories shut down. Its central bank has already stepped
in to support the country's markets and economy.
Other countries in the region are following suit. The脷ank of Indonesia cut湶t
s short-term lending rate by a quarter percentage point last week. The𠮶onetar
y Authority of Singapore said汢arlier this month that "there is sufficient roo
m" to ease its effective exchange rate to combat weakening economic conditions
.
In South Korea, where coronavirus cases spiked last weekend, the central bankꀊleft its interest rates unchanged乸t Thursday's meeting but stressed that the
bank continued to be accommodative and would act to ensure recovery of economi
c growth and stable inflation.
心得:
空军要小心 FED要出手了
美股摩台收盘前急拉
不要追空 高空低补 反弹再空 不要杀低
有爽记得要出
多军的话 就是逢反弹减码
不需要杀低… 也不建议摊平
可以借券放空一些 你看不爽的股票