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Fed will make 'insurance' rate cut as early as next week -Vanguard

Credit: REUTERS/Chris Wattie

Vanguard now sees the chance of a U.S. recession in the next 12-18 months at 40%, up from 30%, and believes the Federal Reserve will implement an "insurance" interest rate cut as early as next week, the firm’s global chief economist Joe Davis said.

By Jennifer Ablan

June 13 (Reuters) - Vanguard now sees the chance of a U.S. recession in the next 12-18 months at 40%, up from 30%, and believes the Federal Reserve will implement an "insurance" interest rate cut as early as next week, the firm’s global chief economist Joe Davis said.

After a rate cut at the Fed's June 18-19 meeting, Vanguard believes there will be "room for one more rate cut for the remainder of the year," the company said in a client report. Vanguard, with over $5.4 trillion in assets under management, is one of the largest asset managers in the world.

Investors believe the chances of a Fed rate cut this year have dramatically increased in the last month, as President Donald Trump’s trade policies heightened fears that the U.S. economy will sink into a recession.

Davis said: "In our view, the hand the Federal Reserve has been dealt - the current economic environment as defined by inflation, labor markets, growth, financial markets, and international conditions - and the probable outcomes it implies for the economy suggest that rate cuts in 2019 will be the most prudent response."

(Reporting by Jennifer Ablan Editing by Chizu Nomiyama and Paul Simao)

((jennifer.ablan@thomsonreuters.com; tel 646 223 6297))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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