US policy rates to fall in 2020

The Fed’s promise to be “patient” is why we now forecast just one additional rate hike in the first half of this year, with the fed funds rate peaking at 2.50-2.75%. But we are increasingly confident in our view that a slowdown in economic growth to below its potential rate in the second half of this year will force the Fed to the side-lines and to then cut rates by a cumulative 75bp in the first half of 2020.