Torsten Slok is chief economist at Apollo Global Management. He's been covered in financial media earlier this week say the the Federal Open Market Committee (FOMC) won;t be cutting the Fed Funds rate this year.
He highlighted ten reasons, which can be lumped into three areas of concern:
Inflation, he says:
- "Underlying measures of trend inflation are moving higher"
- helping this along "the labor market remains tight, jobless claims are very low, and wage inflation is sticky between 4% and 5%"
Growth:
- "Growth expectations for 2024 saw a big jump following the Fed pivot in December and the associated easing in financial conditions"
- "Growth expectations for the US continue to be revised higher"
The stock market:
- "financial conditions continue to ease, which is bolstering M&A markets, credit markets, IPO activity, and, of course, equities"
What hasn't got so much press is his "Fed Cut Reflexivity Paradox":
- the more dovish the Fed sounds, "the more financial conditions will ease, making it more difficult for the Fed to cut,"
- since the FOMC started talking about cuts in November, U.S. stocks have rallied and "the household sector has experienced a windfall." Government spending is also providing "a significant tailwind to the economy"
Want a cut? (AI image)
Powell won't be needing that for a while.