OLDWICK, N.J.--(BUSINESS WIRE)--AM Best anticipates further U.S. and global interest rate cuts in the first half of 2020 as governments strive to provide economic buffers against the potentially wide-ranging impact of the Coronavirus.
The Best’s Commentary, titled, “What a Difference a Month Can Make,” notes that in a surprise move, the Federal Reserve (Fed) cut its federal funds rate by 50-basis-points earlier this week. Other central banks, of note Canada and Australia, also cut policy rates this week with other banks injecting greater liquidity into the financial system. AM Best expects further accommodative monetary policy actions by central banks to continue in the first half of 2020.
In announcing the interest rate cut, Fed Chairman Jerome Powell stressed the underlying strength of the U.S. economy, but also noted that the virus outbreak would weigh on economic activity for some time. The uncertainty surrounding the coronavirus is likely to dampen growth, particularly during the first half of 2020, mainly through declines in spending by both businesses and consumers.
Other factors that could weigh on growth include supply chain disruptions, work place disruptions, growing business and consumer uncertainty, profit warnings and disrupted trade links, all of which have the potential to dampen the economy through declines in employment/work hours, disposable income and confidence concerns. The likelihood of a U.S. recession also has increased.
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