VIEW: Standard Chartered now expect the "FOMC...>

FED: VIEW: Standard Chartered now expect the "FOMC to ease at its April & June

meetings (on hold, prev.) in response to the risk that coronavirus disrupts U.S.

& global activity, taking the Fed funds rate (upper bound) to 1.25% by end-Q2 &

end-'20 (prev. 1.75%) & 0.75% by end-'21 (prev. 1.25%). Fed funds futures

markets currently price in about 17bps by the end of April, 30bps by the end of

June & 60bps by year-end, so this forecast puts us moderately ahead of

money-market pricing in H1. We do not currently expect a 3rd cut in '20, but see

risk of a Dec move if the rebound from coronavirus fears is stunted. The Fed may

explicitly commit to unwind easing if disease risk fades. Our exp. is that

global disruptions to supply chains & tourism from coronavirus will lead the

FOMC to worry that activity will fall below trend. Our baseline view is that

activity will recover in H2, but the disease could prove more persistent and

cause disruption globally rather than primarily in China. We see the risk of

demand weakness as the Fed's immediate focus. A short-term demand drop could

easily outpace any supply drop. If employment begins to flag because of

shortages of raw materials and intermediate goods, wages could fall quickly."