INSUBCONTINENT EXCLUSIVE:
NEW YORK: Citi economists said on Friday if the Federal Reserve decides to lower US interest rates next month, it would do so with a bold 50
basis-points cut, together with an earlier end of its balance sheet reduction.
They said they maintain a base case the US central bank would
not lower borrowing costs at all in 2019, however, if economic data remains "sufficiently strong" and "a not unfavorable outcome" on trade
between China and the United States emerges from next week's G20 summit in Japan.
A couple of other primary dealers, or the top 24 Wall
Street firms that do business directly with the Federal Reserve, said they had a strong conviction about a 50 basis-point rate decrease at
the Fed's next policy meeting in about six weeks.
UBS economists changed their base case to a half-point rate cut next month after this
week's policy meeting.
Barclays economists have been forecasting a 50 basis-point cut in July following data earlier this month that
showed weaker-than-expected jobs growth in the services sector in May.
On Wednesday, the US central bank said it was prepared to lower
borrowing costs as early as July on signs of softening business activity due to trade tensions and persistently sluggish
inflation.
Minneapolis Fed chief Neel Kashkari said the Fed should reduce interest rates by 50 basis points to boost inflation expectations
which have fallen below the Fed's 2 per cent goal.
Interest rates futures implied traders see 32 per cent chance the Fed would lower rates
by 50 basis points in late July, down from 39 per cent late on Thursday but up from 0.4 per cent a month ago, according to CME Group's