Goldman now sees the Fed getting even more aggressive in the face of coronavirus scare

CNBC reports that the Federal Reserve is likely to join other global central banks in cutting interest rates aggressively in response to the coronavirus scare, Goldman Sachs economists said.

With fears over a global slowdown intensifying, the Fed likely will announce a 50 basis point cut at its March meeting, if not sooner, the firm said. In all, Goldman sees the Fed cutting 100 basis points this year, which is an increase from just Friday, when it saw a cut of 75 basis points.

The call comes as the Goldman Sachs Analyst Index falling 7.4 points to 47 in February, which indicates economic contraction. Sales and orders fell into contraction, while output and material prices as well as wages and exports all pulled back though inventories increased. Respondents "cited the virus as a major headwind, and a few analysts noted that a prolonged outbreak could lead to supply chain disruptions in their industry," the firm said.

"Even relative to some of our new policy rate forecasts, we think the risk is on the downside, at least in terms of timing. Specifically, we see a high risk that the easing we expect over the next several weeks occurs in coordinated fashion, perhaps as early as the coming week," Jan Hatzius, Goldman's chief economist, said in a note.

The projection is in line with market pricing, which sees a likelihood that the Fed will cut at least 100 basis points, or 1 percentage point, by the end of 2020.