Goldman doesn't expect the US and China to reach a trade agreement before the 2020 election, and for the continued conflict to spark more cuts.
July's adjustment to a 2% rate from 2.25% marked the first interest rate cut since the 2008 financial crisis. After that 25-basis-point lowering — and following Powell's comments — expectations of further easing at the September FOMC meeting dropped to 63%, according to a Bloomberg survey.
Even before the Fed's initial cut, there was debate over whether a second cut would be necessary later in 2019. The prospect of two additional cuts was seen as a highly unlikely scenario. "In light of growing trade policy risks, market expectations for much deeper rate cuts, and an increase in global risk related to the possibility of a no-deal Brexit, we now expect a third 25-basis-point rate cut in October, for a total of 75 basis point of cuts," Goldman analysts said in the Tuesday note.
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