US bank lobby economist predicts global rate cut coming ... this Wednesday

Reuters conveyed the key US bank lobby economist’s blog post while stating that the investors battered by the breathtaking drop in global stock markets on coronavirus fears are ever more convinced the world’s big central banks, including the Federal Reserve, will soon step in to try to quell the storm.

Key quotes

Against that, the top economist for the U.S. bank lobby - a former Fed insider - issued a remarkably specific prediction on Sunday that the rescue is nigh.

A coordinated global interest rate cut by the top central banks, such as the one executed at the height of the crisis in October 2008 by the Fed and five other central banks.

They will possibly include in this action the People's Bank of China and the Hong Kong Monetary Authority, the two banks whose economies have so far suffered most from the outbreak.

It will happen this Wednesday, March 4. It will happen before the U.S. stock market opens, either at 7 a.m. or 8 a.m. ET (1200 or 1300 GMT).

It will be big: half a percentage point at least. The Fed’s current benchmark lending rate is set in a range of 1.50-1.75%, and rate futures markets are pricing in a cut of at least a quarter percentage point at the Fed’s next scheduled meeting March 17-18. “The only way to get a positive market reaction is to deliver more than expected

Alongside his predictions for a globally coordinated move - something many investors and economists worry could well fall short of what's needed because of depleted tool kits at the world's big central banks - Nelson in a related post said the Fed could loosen a number of requirements and other regulations on U.S. banks to help keep credit moving.

FX implications

While the news failed to generate any direct market impact, the risk-aversion wave gets stronger with most traders leaning on to further rate cuts and easy money. That said, the US 10-year treasury yields slump to the record low of 1.104% while S&P 500 Futures drop 2.35% to 2,918 by the press time.

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