US: Fed going down to 0% – Danske Bank

Strategists at Danske Bank have changed their Fed call based on the latest events. They expect further rate cuts as soon as in March and do not rule out more measures. 

Key quotes

“We now expect the Fed to cut interest rates by at least 100bp and our base case is the target range will decline all the way down to 0.00-0.25% in coming two months.” 

“We think the Fed will start by cutting 50bp in March but we would not be surprised if it happens already before the scheduled meeting. The Fed is still ruling out negative interest rates at this stage.”

“If necessary, the Fed will be willing to restart QE but it is not our base case yet.”

“If the coronavirus fears go away soon, the Fed can always adjust monetary policy accordingly later on. Right now it should, in our view, focus on avoiding the very negative risk sentiment to develop into a real economic crisis.”