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Standard Chartered expects the US to cut interest rates by half a percentage point this week to initiate a rate-reduction cycle that will last into next year, a move that is set to shore up investor sentiment in Hong Kong and other markets, according to a senior executive.
Weak employment data, coupled with a decline in consumption and inflation rates, was likely to prompt the US Federal Reserve to implement its first rate cut of the year, said John Thang, head of markets and strategic client management and solutions for Hong Kong, Greater China and North Asia, on Friday.
Thang predicted that the Fed would reduce its key rate by 50 basis points at the year’s sixth Federal Open Market Committee meeting this Wednesday, bringing the target range down to between 3.75 per cent and 4 per cent. That would mark the US central bank’s first rate adjustment since December, following five consecutive meetings without changes.
About 96 per cent of traders expected a 25-basis-point cut by the Fed on September 17, while the remaining 4 per cent anticipated a 50-basis-point cut, according to data from the CME Group’s FedWatch tool on Friday.
“The weak economic data would mean the US may cut the rate by 50 basis points in September to boost the economy,” Thang said.
