Fed unlikely to make emergency rate cut despite market volatility

DWS Global Chief Investment Officer reportedly said that the Federal Reserve is likely to continue its expected policy path despite recent market turmoil. He said in a report that a panic-driven response from the Fed is unlikely, and he expects the central bank to try to avoid signaling a major policy shift, such as a 50 basis point rate cut or an emergency rate cut between meetings.

He expects the Fed to stick to a gradual easing approach, starting in September and cutting rates by 25 basis points in the coming months.

A recession in the U.S. economy cannot be ruled out, but even if it does occur, it is likely to be mild given the overall strength of the economy and the solid balance sheet of the private sector. DWS does not believe a bear market is imminent, but will keep a close eye on indicators that reflect systemic risks.