Trending
AN INFLUENTIAL FED GOVERNOR has raised the possibility of no rate reductions until the second half of this year, as inflation stays elevated and the economy appears to be growing moderately. “There’s no rush to move,” Gov. Christopher Waller said last night at the Economic Club of New York.
WHEN THIS YEAR BEGAN, the conventional wisdom — wrong as usual — was that the Fed would reduce the federal funds rate several times in 2024; some analysts predicted as many as six rate cuts this year. But inflation has not fallen to the Fed’s goal of 2%, and exuberance continues to grip the stock market.
WHAT THE ANALYSTS GOT WRONG is the level of hawkishness at the Fed, where Chairman Jerome Powell probably can’t get a unanimous vote from the Federal Open Market Committee on when to begin reducing rates. A leading hawk is Waller; another is Raphael Bostic, a voting member of the FOMC who recently said he anticipates lowering interest rates just once this year.
WALLER SAID RECENT INFLATION figures have been “disappointing” and said he wants to see “at least a couple months of better inflation data” before cutting. He pointed to a strong economy and robust hiring as further reasons why the Fed has room to wait to gain confidence that inflation is on a sustained path toward the 2% target.
“IN MY VIEW, it is appropriate to reduce the overall number of rate cuts or push them further into the future in response to the recent data,” Waller said. “I see economic output and the labor market showing continued strength, while progress in reducing inflation has slowed,” Waller said. “Because of these signs, I see no rush in taking the step of beginning to ease monetary policy.”
WALLER ADDED: “I continue to believe that further progress will make it appropriate for the FOMC to begin reducing the target range for the federal funds rate this year.” He added that “until that progress materializes, I am not ready to take that step.”
SOME ANALYSTS ARE STILL EXPECTING rate cuts to begin at the June 11-12 FOMC meeting, but others think it might not come until the July 30-31 FOMC session. After that, the next meeting isn’t until Sept. 17-18 — less than two months before the Nov. 5 elections.
FED OFFICIALS ARE ADAMANT that political considerations don’t affect their pre-election policies, and we believe them. But an initial rate cut on Sept. 17-18 could be awkward, so a July move is still possible. Our guess is that there will be one cut before the election and another before year-end — assuming the data warrants rate cuts, which suddenly is not a certainty in this Goldilocks economy.
Related: A Momentum Shift Toward Biden
The views expressed in this blog are those of the author and do not necessarily represent the opinions of AGF, its subsidiaries or any of its affiliated companies, funds or investment strategies.
The views expressed in this blog are provided as a general source of information based on information available as of the date of publication and should not be considered as personal investment advice or an offer or solicitation to buy and/or sell securities. Speculation or stated believes about future events, such as market or economic conditions, company or security performance, or other projections represent the beliefs of the author and do not necessarily represent the view of AGF, its subsidiaries or any of its affiliated companies, funds or investment strategies. Every effort has been made to ensure accuracy in these commentaries at the time of publication; however, accuracy cannot be guaranteed. Market conditions may change and AGF accepts no responsibility for individual investment decisions arising from the use of or reliance on the information contained herein. Any financial projections are based on the opinions of the author and should not be considered as a forecast. The forward looking statements and opinions may be affected by changing economic circumstances and are subject to a number of uncertainties that may cause actual results to differ materially from those contemplated in the forward looking statements. The information contained in this commentary is designed to provide you with general information related to the political and economic environment in the United States. It is not intended to be comprehensive investment advice applicable to the circumstances of the individual.
AGF Investments is a group of wholly owned subsidiaries of AGF Management Limited, a Canadian reporting issuer. The subsidiaries included in AGF Investments are AGF Investments Inc. (AGFI), AGF Investments America Inc. (AGFA), AGF Investments LLC (AGFUS) and AGF International Advisors Company Limited (AGFIA). AGFA and AGFUS are registered advisors in the U.S. AGFI is a registered as a portfolio manager across Canadian securities commissions. AGFIA is regulated by the Central Bank of Ireland and registered with the Australian Securities & Investments Commission. The subsidiaries that form AGF Investments manage a variety of mandates comprised of equity, fixed income and balanced assets.