The central bank’s official money rate is likely to drop in the coming days, at least according to some of the top Wall Street analysts. With the threat of a widespread Coronavirus outbreak looming, stock markets have taken a significant dive over the last week. Although market futures are beginning to show some optimism, it’s still likely that the Federal Reserve will offer some relief in the form of a small rate cut.
This could help to stimulate the economy in the meantime, and it could bring an end to the stock market rout that ended one of the strongest bull markets in history.
Next Federal Reserve Meeting This Month
The Federal Reserve will have its next meeting from March 16 – 17, but some analysts believe that a rate cut could be announced before then.
Jerome Powell, current Chairman of the Fed, said on Friday that his agency is “closely monitoring” the Coronavirus outbreak, and he and his team would “use our tools and act as appropriate to support the economy.
Goldman Sachs Group Inc., a top investment bank, said in a report over the weekend that “We see a high risk that the easing we expect over the next several weeks occurs in coordinated fashion, perhaps as early as the coming week.”
The bank believes that Canada, Australia, Norway, New Zealand, Switzerland, South Korea, the United Kingdom, and the European Central Bank will all announce cuts within a short time frame. These banks cover areas that are worst-affected by the Coronavirus outside of China.
Bill Nelson, a monetary policy analyst at the Bank Policy Institute, and a formal Federal Reserve official, has a prediction in line with Goldman Sachs Group. He wrote in a blog post on Sunday that “There will be a coordinated easing across the major central banks and, possibly, the People’s Bank of China and the HKMA.”
Nelson believes that the cuts could take place as early as Wednesday morning.
Will Rate Cuts Bring the Markets Back Up?
Rate cuts stimulate the economy by making lending more affordable, which can increase consumer and corporate spending. Investors could see a rate cut as ideal during this volatile period.
If rates are cut this week, then the Federal Reserve and other central banks are likely to offer guidance for the coming months. This should help to ease tension and give investors and the general public a better look at the economy moving forward.
With Coronavirus spreading internationally, it’s critical that monetary systems are protected for the months to come.
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