Market expectations are growing for a cut to benchmark interest rates, which currently stand at a range between 2.25% and 2.50%, and strategists at Bank of America don’t think that the market is going to be disappointed.
The BAML analysts said that analysis of the past five rating-cutting cycles, 1989-92, 1995-96, 1998, 2001-02 and 2007-08, point to the first rate cut taking place as soon as September. Mounting expectations for a Fed rate reduction, coming only after Powell & Co. delivered the most recent interest-rate increase in December, are supported by a number of factors: combating recessionary signs; boosting stubbornly low inflation, running below the Fed’s 2% target; addressing market anxieties; and, confronting the headwinds produced from the U.S.’s trade conflicts.
Hope for a rate cut, however, have buoyed stocks in recent trade, with the Dow Jones Industrial Average DJIA, +0.71% on pace for its fourth straight gain and the Nasdaq and S&P 500 index SPX, +0.61% on track for their third advance in a row.
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Like taking the hair of the dog, this just prolongs the hangover and makes it worse once it hits.
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