June 17, 2019 / 5:39 PM / 2 months ago

Fed may cut rates near zero if U.S.-China trade worsens: Morgan Stanley

FILE PHOTO: The Federal Reserve Board building on Constitution Avenue is pictured in Washington, D.C., March 27, 2019. REUTERS/Brendan McDermid/File Photo

NEW YORK (Reuters) - The Federal Reserve may lower U.S. interest rates to near zero by the spring of 2020 if U.S.-China trade relations deteriorate further and tip the U.S. economy into a recession, according to Morgan Stanley analysts.

Such a dire scenario would knock the S&P 500 toward 2,400, nearly 500 points or 17% below its current level, while benchmark 10-year Treasury yields would slip to 1.75% later this year, down 33 basis points from current levels, they wrote in a report “Beyond the G20” released on Monday.

Reporting by Richard Leong; Editing by Richard Chang

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