FOMC: Further stimulus remain in the pipeline - UOB

FXStreet reports that UOB Group’s Senior Economist Alvin Liew assessed the latest FOMC meeting.

“The Federal Reserve in April 2020 FOMC further reinforced its forward guidance to be more explicit about how long rates will stay low, saying that the “Committee expects to maintain this target range until it is confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals.”

“Powell also maintained that the Fed is not “in any hurry to withdraw these measures or to lift off. We’re going to wait until we’re quite confident that the economy is well on the road to recovery.”

“US 1Q 2020 GDP, contracted more than expected at -4.8% q/q SAAR but Powell warned that 2Q could see an unprecedented decline.”

“Going forward, as Powell has pledged, the Fed will do more especially when the expectations of a “unprecedented” 2Q comes to pass. That said, we continue to believe the Fed will do more except negative policy rates.”

“In terms of growth outlook, we now factor a 28% decrease in 2Q (but markets are looking at a sharper contraction, the most bearish estimate being -65%). The projected 2H rebound (+6.6% in 3Q and 10.4% in 4Q) will not offset the 1H contraction, so US overall GDP will now contract by 5.0% in 2020 (from previous estimate of -4.1%).”