Rising recession risks drive two-year Treasury yields to record lows, sparking expectations for aggressive rate cuts, Citi reports.
Citi predicts 25bp cuts at each meeting, with potential for 50bp cuts if economic data worsens.
Key indicators like job reports and ISM manufacturing numbers will determine Fed's actions.
Fed Chair Powell reassures readiness to tackle economic weaknesses with rates above 5%.
Analysts warn that current policy rates are restrictive and could lead to further unemployment.
Transition to a neutral stance with rates closer to 3% may be necessary to support the economy.
Fed may need to exceed market expectations to boost the economy, Citi suggests.
Analysis:
The article discusses how recession risks are impacting Treasury yields and the potential for rate cuts by the Federal Reserve. Citi forecasts gradual cuts of 25bp at each meeting, with a possibility of more aggressive cuts if economic data deteriorates. Key economic indicators will play a crucial role in the Fed's decision-making process. The current policy rates are seen as restrictive, prompting the need for a transition to a neutral stance with rates closer to 3% to support the economy. Citi suggests that the Fed may need to exceed market expectations to stimulate economic growth.
