FILE PHOTO: The Federal Reserve building is pictured in Washington, DC, U.S., August 22, 2018. REUTERS/Chris Wattie/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.