“I think the base case is that this will, as other viruses have dissipated, this one will also dissipate,” St. Louis Fed President James Bullard says about the coronavirus impact. “But you never know.”
However, traders in the fed funds futures market are indicating about a 54% chance of a rate cut by June and a 58% probability of a second move lower by the end of the year, according to the CME's FedWatch tracking tool.Bullard pushed back on the likelihood of a cut, saying current policy seems right considering the pace of the record-breaking U.S. expansion.
"There's a high probability that the coronavirus will blow over as other viruses have, be a temporary shock and everything will come back. But there's a low probability that this could get much worse," he said. "Markets have to price that in, and that drags down the center of gravity a little bit. But if this all goes away, I expect that pricing will come back out of the market and we'll be back to the on-hold scenario.
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