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HSBC expects another 25bp chop at the upcoming meeting in mid-March, with the Fed Funds rate ending the year in the range of 0.75-1.00%

HSBC Expects Fed to Deliver another 25bp Rate Cut This March
With the Fed's surprise cut, and another 25bp likely this month, HSBC now expects further easing in Asia amid rising growth risks
HSBC now adds rate cuts in China, Malaysia, Thailand, Australia, New Zealand, Vietnam, Malaysia, India, Korea, and the Philippines
Fiscal policy, at least initially, should prove more potent; HSBC expects more easing in China, Korea, Japan, Australia, and Thailand
The Fed came out swinging yesterday and knocked 50bp off its policy rate. And that's probably not the end of it: HSBC expects another 25bp chop at the upcoming meeting in mid-March, with the Fed Funds rate ending the year in the range of 0.75-1.00% (see Ryan Wang, Fed 50bp intermeeting cut: Blunt tools to tackle coronavirus risks, 3 March).
Meanwhile, the latest PMIs are a reminder how quickly the impact of the coronavirus outbreak is spreading through the world economy. And, judging from falling new orders and new export orders, the slump in activity will likely linger for some time (see After the China stumble: What the latest PMIs mean for Asia, 3 March). Policymakers, as a result, have already announced support measures, both fiscal and monetary, to cushion the impact, but more remains to be done, given mounting growth risks. And the Fed's move just opened the door.
In mainland China, HSBC expects another 50bp LPR cut (previously 30bp), and a 30bp deposit rate cut (20bp), on top of our existing call for 100bp of RRR cuts and 20bp MLF cut in 2020. In Australia, we have just added another rate cut and now expect the RBA to flag in 2Q20 the start of QE (see Paul Bloxham and Daniel Smith, RBA Observer Update: Decisive Cut, with another cut and QE now likely, 3 March). In New Zealand, we've today changed our call to a 50bp cut at the March meeting (25bp before), and added a 25bp chop in 2Q20 (see Paul Bloxham and Daniel Smith, RBNZ Observer Update: Now expect 75bp of cuts, 4 March).
In Korea, Thailand, Vietnam, Malaysia, and the Philippines, we have added a 25bp cut to our policy rate forecasts this year. In India, HSBC is adding another 15bp to cuts, likely in 2Q20, although there is a risk of an earlier inter-meeting move. All of this is on top of another rate cut already pencilled in for Indonesia, and a flattening of Singapore's NEER slope.
On the fiscal side, various measures have already been announced, notably a punchy support package in Hong Kong, and a generous budget in Singapore. Apart from what has already been announced across the region, even more fiscal support will likely be provided in mainland China, Korea, Japan, Thailand, and Australia, and more modest additional measures possibly also in Taiwan, Indonesia, and India. Overall, most economies in the region maintain ample fiscal space to add more support.

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