Following the events of the last 24 hours, economists at Wells Fargo changed their economic forecasts. Now they see a deeper contraction in US GDP and expect the Fed Funds rate to drop back to the 0.00% - 0.25% range.
Key Quotes:
“We now think it is likely that the committee will slash its target range for the fed fund rate 100 bps on March 18, if not sooner. This would return the fed funds rate to the range of 0.00% to 0.25% where the FOMC maintained it from December 2008 to December 2015. Moreover, the Fed may provide some “forward guidance” by stating that it intends to keep the range at that level for an extended period of time.”
“We looked for a mild contraction in U.S. GDP in the second quarter with some bounce-back later this year. It looks increasingly likely that the coming contraction will be deeper and more protracted than we were anticipating just a few days ago. In short, it seems that recession is increasingly highly. The airline and hotel industries are in free fall, and there will be multiplier effects from cutbacks in those industries. Moreover, banks will likely begin to tighten credit standards—credit spreads in the corporate bond market have already widened significantly—and the uncertainty that pervades the nation at present is an awful backdrop for business fixed investment spending. Businesses may be loath to displace workers right now, but layoffs will eventually commence when order books begin to dry up.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
AUD/USD consolidates below 0.6600 amid the US election uncertainty
AUD/USD remains on the defensive below the 0.6600 mark on Tuesday as traders seem reluctant ahead of this week's key event risks – the US presidential election and the FOMC policy meeting. In the meantime, the unwinding of the Trump trade continues to weigh on the USD and offers some support to the currency pair.
EUR/USD posts modest gains above 1.0850, all eyes on the US presidential election results
The EUR/USD pair trades with mild gains near 1.0880 during the early Asian session on Tuesday. The US Dollar edges lower as traders brace for the outcome of the US presidential election and a likely interest rate cut from the Federal Reserve, which supports some support for the major pair.
Gold price hangs near one-week low; downside seems cushioned ahead of the US election
Gold price remains close to a one-week low set on Monday, though the downside seems limited amid safe-haven demand stemming from the US election uncertainty and talks of an Iranian retaliatory strike on Israel.
RBA widely expected to keep interest rate unchanged amid persisting price pressures
Australia’s benchmark interest rate is set to stay unchanged at 4.35% in November. The focus remains on Reserve Bank of Australia Governor Michele Bullock’s comments and updated economic forecasts. The Australian Dollar could wilt if RBA Governor Bullock ramps up bets for a December rate cut.
US presidential election outcome: What could it mean for the US Dollar? Premium
The US Dollar has regained lost momentum against its six major rivals at the beginning of the final quarter of 2024, as tensions mount ahead of the highly anticipated United States Presidential election due on November 5.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.