Analysts at Wells Fargo, estimate that the Federal Reserve could cut its monetary policy rate two times during 2019. They forecast one 25 bps cut in July 2019 and another cut in Q4-2019 and the Fed funds range to remain unchanged at 1.75%-2.00% in 2020. 

Key Quotes: 

“Inflationary pressure remains modest. We do not expect core PCE inflation to return to 2% until 2020. Although we continue to believe much of the recent weakness has been transitory, we also believe the Fed has become increasingly committed to showing that 2% inflation is a symmetric target.”

“The trend in hiring has downshifted, but remains strong enough for gradual labor market tightening to continue. By our estimates, it takes job growth of about 100,000 per month to meet labor force growth and keep unemployment steady.”

“Both domestic and global growth have slowed, and slower inflation has pushed up the real federal funds rate. With limited fears about the Fed being “behind the curve” and less available ammunition than in prior expansions, we think the Fed is likely to deliver two “insurance” cuts to forestall a sharper deceleration in GDP and prices.”

“So long as the data evolve as we expect, we do not believe further accommodation will be needed in 2020.”
 

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