Here’s why one expert says the Fed should have cut interest rates months ago.
Catch the full interview with Ahmed Riesgo and TheStreet’s Caroline Woods here:
CAROLINE WOODS: I was taking a look at the CME Fedwatch tool. And it looks like 60% chance that the Fed could stay on hold once again in September, now obviously that could change. We know that the president isn’t very happy with Powell, given some of his choice words about the decision to stay on hold. But at the same time, we did see PCE come in slightly hotter than expected. So you think that the data justifies cuts on the inflation side?
AHMED RIESGO: Yeah so in our view, the Fed should have probably been cutting back in June. And let me explain to you why the broader disinflationary trade a trend is in place. Housing wages they’re all going down. Are we going to see a temporary spike. And I know that’s a very loaded word in this, you know, given recent history with the Fed. But are we going to see a temporary spike in inflation due to the tariffs. Absolutely it’ll probably peak six months from now. And by 12 months you won’t even see it in the inflation data anymore. But those are classic. That’s a classic transitory spike that the Fed would normally completely ignore as far as setting their monetary policy. However, because the president has been putting so much public pressure on the central bank Governor sorry, on the chairman to cut rates. He’s actually working against himself because I think it’s make it less likely that Powell actually cuts rate. And I think what you’re seeing is a sort of institutional leaning into the fact, like, hey, we are independent. We’re not going to bend to your will. We’re going to do what we think is right. Unfortunately, actually, I think that’s a mistake because they should have already started to cut rates.
CAROLINE WOODS: And how much could even a one time shock in terms of higher prices spook the market, given the fact that it’s near all time highs right now. Doesn’t seem too fazed by that tariff deadline. Do you think that it could be setting itself up for a fall, though, if we do see those price shocks?
AHMED RIESGO: Yeah look, obviously there’s not a lot of room for error if we were to get a price shock. But again, a price shock is different than inflation. Right and this is what everyone has to come to terms with. You know a tariff. Tariffs don’t increase inflation, they will cause an increase in the inflation data. Temporarily as a mathematical function. But inflation is the systemic consistent. Rise of prices and increase in the money supply. Tariffs do not cause inflation in the longer term.
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