The prediction came a day after a global stock market rout amid concern over the ongoing trade war as seen in tit-for-tat tariff levies between the world’s two largest economies.
Speaking on an RTHK radio programme, Terence Chong, executive director of Chinese University’s Lau Chor Tak Institute of Global Economics and Finance, said that if the US stocks continue to slump, the Fed’s top priority is to save the economy.
“I believe the chance of the Fed cutting rates due to the slump in US stocks and global stock market is high,” he said.
“Because if US stocks continue to drop, it has to save the economy first.
“Inflation is not its top concern.”
US President Donald Trump has threatened to impose an additional 50 percent tariffs on Chinese goods from Wednesday if Beijing does not retract its 34 percent counter-tariffs to the American levies imposed last week.
Chong said this shows that Trump was scared of China tariffs.
The economist pointed out that as soybean is one of China’s top US imports, soybean farmers would be hit the hardest under the potential additional levy.
He also said if the trade war escalates, it might give rise to smuggling and panic buying in the United States when some goods are not imported to Washington.
Separately, Chong expects Hong Kong stocks to remain fluctuate in the short run and suggests investors not enter the market for now.
