The "tail risk" of a deep and protracted recession in the US has not diminished much in recent weeks in spite of the rally in the stock market and improvement in some credit markets, top Federal Reserve officials believe.
This view will probably lead the Fed to cut interest rates by another quarter point (25 basis points) to 2 per cent tomorrow.
The statement is likely to position the US central bank to pause at the following meeting in June, while preserving the option of a further cut at that meeting if required.
The plan to pause should not be mistaken for a signal that the Fed believes the rate-cutting cycle is necessarily over. Rather, policymakers see the case for holding fire while they review economic and market data around the middle of the year.
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