In the wake of the Brexit vote, the next Federal Reserve interest rate hike has been put on hold. Many economists still expect another hike by the end of 2016, but others are concerned that the Fed’s next move will need to be some form of easing.
Unfortunately, with interest rates near record lows, the Fed’s ability to ease is limited. However, according to Citi Research, the Fed still has plenty of options for stimulating the economy.
In a new report, Citi analyst Andrew Hollenhorst outlines nine potential steps the Fed could take in the event of an economic downturn:
- 1. Stop talking about a need for rate hikes.
- 2. Start talking about leaving rates flat in the future and confirm this outlook via the “dot plot.”
- 3. Cut interest rates from 0.25-0.5% to 0-0.25%.
- 4. Implement another “twist” of selling short maturity and buying long maturity.
- 5. Implement…
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