The recent escalation of the US-China trade war has surpassed the future recession of the US economy, according to most economists interviewed by Reuters, who predict that the Federal Reserve will cut interest rates again in September and again next year.
Despite expectations for a new monetary decline, the survey conducted August 6-8 gives a 45% chance that the US economy will enter the recession in the next two years, increasing by 35% in the previous and most recent survey. . high level after May 2018, when this question was first formulated.
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A bond market index that measures the risk of the US recession gave the strongest signal in March 2007, highlighting concerns about the impact of the trade war on the world economy.
Last week President Donald Trump announced that he would impose tariffs of 10% on other imports of China worth $ 300 billion, and on Monday, Washington labeled China as money handlers.
Beijing warned that the latter measure would "significantly affect the global financial order and cause chaos in the financial markets," at the same time preventing the global economy from recovering.
Nearly 70% of economists have responded that the latest developments are bringing the recession to the US economy.
"Certainly, increasing business tensions through higher rates and restricting access to markets affects confidence, increases costs, affects distribution chains and weakens corporate profitability," wrote James Knightley, ING's chief international economist.
These factors are eventually transferred to consumer confidence and spending, increasing the risk of recession, Knightley said.
Considering that the Federal Reserve does not anticipate a noticeable increase in inflation, the central bank expects it will reduce the benchmark interest rate by another 0.25 percentage points in September, to 1.75% -2%. A future measure of this type will take place in the second part of next year.
Last month, analysts anticipated that further interest rate cuts would occur in the fourth quarter of this year, but not next year.
Traders on the financed market increased their expectations for several interest rates, forecasting one measure in September, followed by another, 0.25 points in October, and a probability of over 40% for a cut in December.
However, it is unclear whether the central bank will reduce interest rates, especially more than once, especially after Fed chairman Jerome Powell downplayed the latest cut "as an adjustment policy adjustment."
Ask whether the US economy needs more interest rates this year, nearly three-quarters of respondents said yes, but the rest did not.
According to the latest Reuters survey, US economic growth will slow at an annual rate of 1.8% by the end of 2020, from the 2.1% growth reported for the previous quarter and much less than the 3.1% forecast before first quarter.
Rates have not changed compared to the previous month, though more economists are now forecasting a significant slowdown in economic growth, despite higher expectations that the Federal Reserve will relax monetary policy.