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The U.S. Federal Reserve could hike interest rates once more by June despite a growing, near 50-50 chance of a 2020 recession, Vanguard Group Inc. chief investment officer Greg Davis said on Monday.

Mr. Davis sees steady inflation and an environment that can be supportive of corporate bonds and other relatively risky assets. Wage growth and other economic data could help the Fed raise rates once more before a “permanent” pause given heightened uncertainty on trade, geopolitics and other issues.

“You just know there’s risks, and with risk comes uncertainty, and with uncertainty businesses tend to be more cautious,” Mr. Davis told reporters at the Inside ETFs conference in Hollywood, Fla.

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Growth in the United States will likely slow to 2 per cent over the next year, with China’s rate at 6 per cent and Europe’s at an anemic 1 per cent, he said.

Risks of a U.S. recession are 30 per cent to 35 per cent for 2019, but rise to between 40 per cent and 50 per cent for the year after, according to Vanguard’s models, Mr. Davis said.

Late last month, the U.S. Federal Reserve said it would be “patient” before making any further moves on rates due to increased uncertainty around the economic outlook.

Mr. Davis said Vanguard’s active portfolio managers have been positioning for a wider gap between short- and long-term bond yields, adding that they have grown more defensive on corporate bonds and see cash as a place where investors can earn a reasonable rate of return with zero risk.

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