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Morgan Stanley expects FOMC to cut 75bps(50 on March 18, 25 in April)

Morgan Stanley has slashed their US 2020 GDP growth forecast to 1.5%

  • from 1.8% previously

Projections for the Fed:

  • 50 bps rate cut in March
  • 25bps in April

MS add that if recession:

  • Fed to cut to zero
  • & restart QE
PS. I am seeing (again) the ‘central bank rate cut is ineffective therefore they won’t and we need fiscal stimulus instead’ comments.
This is, unfortunately, a very common mistake that is made.
I posted this ahead of the RBA meeting last week (before the RBA cut its cash rate) , just change around the names:
  • Some folks will argue rate cuts will be ineffective against the virus, which is the wrong argument, of course rate cuts won’t cure a virus! Sheesh. The central bank move, if it comes,  will be predicated on taking action to avert too much economic harm. Some folks will argue that a rate cut will be ineffective for this, that government stimulus (fiscal) would be better, and they have a fair point … but you have to remember a rate cut is the tool available to the central bank, they can’t provide fiscal stimulus. “The RBA should stand firm and force the government to act” is another argument. Unfortunately this is no time for dick swinging contests (its a male-dominated sphere) and the RBA will not play this game.