Two more rate cuts on the cards for US Fed: T. Rowe Price

T. Rowe Price has confirmed its expectations regarding the US Federal Reserve’s (US Fed’s) next policy moves, predicting two further 25 basis-point rate cuts this year alone.

Steve Boothe, Head of Investment Grade and a portfolio manager in the Fixed Income Division at T. Rowe Price, said the firm is also expecting the US Fed to make a total of six interest rate cuts by next year.

“The market has priced in too many rate cuts overall. We’re a bit more constructive on the overall economy relative to the market at this moment.

“We don’t see conditions in place for a recession, and believe the economy is in relatively good shape despite the current slowdown.”

Boothe also warned of rising inflationary pressures as the economy edges towards “re-acceleration” as early as Q1 next year, but said the US Fed is likely to remain “patient” and not “aggressively hike rates in response”.

“There are signs that the economy could re-accelerate in Q1 next year, driven by factors like commodity prices bottoming out, and potential improvement in housing and investment cycles,” he said.

“Looking forward, US elections will be an important event that investors will be watching closely. I expect to see volatility around the elections, as investors may look to hedge their positions.

“A divided government outcome from the US elections would likely be the most well-received scenario by markets.”