Source: Golden Ten Data
This major Wall Street bank still believes that political factors will push the Federal Reserve to cut interest rates as soon as possible.
Although a series of popular economic data has prompted most traders to postpone their bets on the Fed's interest rate cuts until later this year, State Street Global Investment Management continues to insist that the Federal Reserve will cut interest rates as early as June.
The company's chief investment officer, Lori Heinel, said that the $3.6 trillion asset management company still believes that the Federal Reserve will begin easing monetary policy before the US presidential election in November to avoid being seen as affecting the election results.
She said that the inflation background still supports this move due to the long lag in austerity policies and the low quality of recently released data.
“We still think the Federal Reserve may cut interest rates for the first time in June,” Heinel said. “We acknowledge that recent data puts this view in jeopardy, but the overall inflation situation supports interest rate cuts.”
Over the past few months, at a time when the opinions of other institutions in the market have fluctuated greatly, State Street Bank has insisted on its interest rate cut expectations from the Federal Reserve.
Earlier in April, before data confirmed that inflation had remained high for the third month in a row, Heinel said that the company was betting that the Federal Reserve would cut interest rates by 50 basis points in June and 150 basis points before the end of the year. Since then, Heinel has lowered the Fed's interest rate cut forecast for the year to 100 basis points, but it is still double the average market expectation.
Marilyn Watson, head of global fundamental fixed income strategy at BlackRock, said that the company expects the Fed to cut interest rates about twice this year because economic data is resilient and the labor market is “unexpectedly strong”, making it impossible for the Federal Reserve to relax policies faster. “We did expect interest rates to be higher and more durable at the beginning of this year,” Watson said. “We do still think it's likely that there will be some interest rate cuts this year, but I think it's probably quite reasonable to cut interest rates about twice at the moment. They are likely to cut interest rates in June.”
Prior to Heinel's remarks, strong retail sales data pushed US Treasury yields to new highs during the year. Markets await comments from Federal Reserve Chairman Powell late Tuesday.
Earlier, New York Federal Reserve Chairman Williams said that if inflation continues to gradually fall, the Federal Reserve may start lowering interest rates this year. Although the central bank has made great progress in balancing inflation and employment targets, there is no need to cut interest rates in the short term. San Francisco Federal Reserve Chairman Daly also said there is no rush to adjust interest rates.
Editor/Jeffrey