Goldman economists are already seeing a better chance for the Fed to cut interest rates in September. The reason is the threat Trump raised yesterday that he would impose new tariffs on Chinese goods.
"The chance of a cut next month is already 70% for 25 points, 10% for 50 points and 20% for nothing to change." says Jan Hatzius, chief economist at Goldman.
In their previous forecast, the odds were 55% down by 25 points in September.
Trump's sudden announcement yesterday of imposing 10% tariffs on goods from China for nearly $ 300 billion, including on phones, computers and clothing. This will exacerbate the negative effect on the global economy, forcing the central banks to take more firm decisions.
Goldman sees a 90% chance of another interest rate cut by the end of the year, up from 80% in its previous forecast. They also believe that the Fed will cut interest rates by a total of 50 points, but the announcement yesterday raises the likelihood of a more serious cut.
Source: Bloomberg Finance L.P.
Graphs: Used with permission of Bloomberg Finance L.P.
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