While the U.S. Federal Reserve signaled a pause in the easing cycle, some further weakening in the U.S. economic data could cause the central bank to deliver more rate cuts over the next few quarters, a U.S. economist said on Thursday.
The Fed on Wednesday lowered interest rates for the third time this year after concluding its two-day policy meeting, but signaled that it will pause to assess the economy before acting again.
Fed Chairman Jerome Powell told reporters at his post-meeting press conference that the current stance of monetary policy is "likely to remain appropriate." He emphasized that current interest rates will hold as long as "the outlook remains broadly in keeping with our expectations."
But Tiffany Wilding, executive vice president of the global investment management firm PIMCO, believed that economic data over the next few quarters is likely to justify additional rate cuts by the Fed.
"Overall, we believe the bar for further cuts is much lower than that of hikes, and a prolonged period of steady rates is predicated on an outlook that we believe may be too upbeat," Wilding wrote in a blog post on Thursday.
"It may not be a particularly high bar for the Fed to downgrade their outlook, since their 2-percent 2020 growth forecast is currently above both consensus (1.7 percent) and PIMCO's forecast (a 1.25 percent-1.75 percent range)," she said.
Wilding noted that global trade and industrial production growth haven't obviously bottomed, which suggest U.S. investment and export growth will weaken somewhat further.
"Real consumption growth is still likely to slow over the coming quarters as lower corporate profits weigh on labor market momentum, aggregate incomes, and real consumption," she said, adding U.S. inflation has also remained below the Fed's long-term target of 2 percent.
Wilding said her firm expects a higher risk of further rate cuts over the next several quarters as some further weakening in the U.S. economic data may cause Fed officials to downgrade their outlook.
The U.S. economy expanded at an annual rate of 1.9 percent in the third quarter of the year, slightly lower than the 2-percent growth rate in the second quarter, the Commerce Department reported on Wednesday. This marks a further deceleration from the first quarter's 3.1-percent growth rate.
The latest growth figures confirmed that Washington's tariffs against imports from other trading partners continued to take a toll on American businesses and the overall economy. The U.S. economic growth is likely to slow further in coming quarters amid protracted trade tensions and weakening business investment.