Fed seen cutting U.S. rates by 25 bps late July: BAML

FILE PHOTO: Federal Reserve Board building on Constitution Avenue is pictured in Washington, U.S., March 19, 2019. REUTERS/Leah Millis/File Photo

NEW YORK (Reuters) – The Federal Reserve will likely reduce key U.S. borrowing costs by a quarter point at its upcoming July 30-31 policy meeting with the chance of a 50 basis-point decrease, Bank of America Merrill Lynch analysts said on Wednesday.

The U.S. central bank would follow a possible July rate cut with two more at the Fed’s next two meetings in the aftermath of a perceived “dovish” testimony from Fed Chairman Jerome Powell before a U.S. House of Representatives panel, the BAML analysts said.

Powell cited softening global economic data as the impetus for the Fed to cut rates for the first time since the global financial crisis more than a decade ago.

He dismissed somewhat better economic readings on the United States, which is experiencing its longest economic expansion on record.

The Fed “is taking out insurance with hopes of extending the recovery and ultimately gaining policy space,” BAML analysts wrote in a research note.

Reporting by Richard Leong; Editing by Chizu Nomiyama and Jonathan Oatis

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