Impact of New Coronavirus Continues... Fed Rate Cut Outlook Rises

Jerome Powell, Chairman of the U.S. Federal Reserve (Fed), appeared before the Joint Economic Committee of the House and Senate on November 13 last year (local time) to share his views on the economic outlook. (Photo by Yonhap News)

[Asia Economy Reporter Moon Jiwon] There are predictions that the U.S. Federal Reserve (Fed) will cut the benchmark interest rate in the first half of this year considering the impact of the novel coronavirus infection (Wuhan pneumonia).

According to the Chicago Mercantile Exchange (CME) FedWatch on the 8th, the federal funds (FF) futures market analyzed that the probability of the Fed lowering the benchmark interest rate by 0.25 percentage points from the current 1.50?1.75% in June is about 31.7%.

Considering that this figure was around 15% at the beginning of the year, the outlook that the benchmark interest rate will be cut has increased.

J. F. Perro, senior economist at Scotiabank Canada, explained, "The view that the Fed will cut interest rates due to the novel coronavirus is gaining more support."

In this regard, some countries including China have already been implementing monetary policy responses such as interest rate cuts.

The People's Bank of China lowered the reverse repurchase (reverse RP) rate on the 3rd and supplied liquidity worth 1.2 trillion yuan (approximately 204 trillion won), the largest daily amount since 2004, to banks.

However, some argue that since interest rates are already at historically low levels, it may not be easy for the Fed and other major central banks to further cut rates.