While the next FOMC meeting isn’t until March, investors and analysts alike are still considering the impact of the January meeting, where the Fed opted to hold rates steady, and if it will cut rates in the future.
Many analysts now feel that the economy is more robust and durable, and that despite short-term disruptions from anomalies like the coronavirus, there is little need to cut rates further.
With significant disorder in China and global uncertainty due to the coronavirus, could the United States be a safety play for many investors who are concerned about the global economic uncertainty that is going on?
“Well you see the dollar is obviously very strong. I mean the last year equities were up about 25%, and interest rates are down over 100 basis points. The dollar is slightly higher. It’s hard for the dollar to go down if US growth prospects are as good as I’m suggesting, and also the US is perceived as a safe haven, which it has been,” LaVorgna added.
Despite the fact that many investors would like interest rates to come down further though, not all analysts believe that they should come down, or that it is even necessarily good for the economy that rates do undergo additional cuts.
“No I don’t think they need to come down, and in fact I wasn’t in the camp that [Powell] needed to make the last cut that he made. I actually thought he should’ve left them where they were. But that being said, certainly In an election year, I think the last thing the Fed wants to do is to be partisan on either side. So I don’t think rates are going anywhere, and although he may be leaning dovish, I think you have to leave the door open just in case the coronavirus turns into something much bigger than it is. I think rates actually stay unchanged,” said Kenny Polcari of SlateStone Wealth on the same segment.
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