While the U.S. Federal Reserve has signaled it will not lower interest rates again this year, S&P Global Ratings is predicting another cut in December if trade tensions escalate.

The Fed on Wednesday lowered its benchmark rate by another 25 basis points to a target range of 1.75% to 2% — the second cut so far this year — citing an uncertain global economic outlook and muted inflation pressures.

The latest “dot plot” chart also showed the median forecast of the 17 policymakers is for the federal funds rate to remain unchanged for the rest of 2019.

Five of the Federal Open Market Committee members predicted another cut of 25 basis points — a position S&P agrees with.

“S&P Global Economics now expects one more [cut] in December … contingent upon an escalation in trade tensions, further weakness in global growth, and increased geopolitical tensions,” the rating agency said in a news release. “The Fed is then expected to remain on hold in 2020.”

“If the U.S. rolls back tariffs against China and the dispute with the EU dissipates, the Fed would likely remain on the sidelines in December,” S&P added. “The Fed will also consider increased geopolitical risks, including further disruptions to oil supplies in the Middle East, when it decides whether another ‘insurance’ cut is necessary.”

As the Los Angeles Times reports, Fed officials “are split on just how much preventive medicine is warranted.” While the U.S. economy “is still expanding at a healthy clip,” they cannot “sit still in the face of turbulence from the trade war as well as weakness in the global economy.”

S&P also suggested signs that inflation is picking up will “complicate the Fed’s mission.” The core Consumer Price Index rose 0.3% month over month in August and 2.4% year over year, the third consecutive monthly gain, although core personal consumption expenditures, the Fed’s preferred inflation metric, remains well below its 2.0% target.

“If history is any measure of what to expect, the strength of core CPI suggests that we may see core PCE start to pick up soon,” S&P said.

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