Morgan Stanley analysts said Monday they now expect the Federal Reserve to cut interest rates twice in September and October.
"The warming trade war has begun to boil, corporate confidence and capital expenditure have weakened further, global economic growth remains weak and inflation expectations have declined," while the difference in yields between three-month Treasury bills and 10-year Treasury bonds shows that monetary policy is too tight, an analyst at the investment bank said. The report points out.
Analysts had expected the Fed to cut interest rates only in October, saying the Fed would "wait for further evidence that the economy faces downside risks."
Many investors bet that the Fed's first rate cut since late 2008 will be the beginning of a series of actions to reduce borrowing costs. Goldman Sachs (GS.N) said earlier this month that it expected the Fed to cut interest rates in September and October.
Morgan Stanley is one of the 24 so-called first-class traders in the spot market of U.S. government bonds, who can trade directly with the New York Federal Reserve in the open market operations of the Federal Reserve.
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