Analysts argue against Fed rate cut, citing improving inflation and economic indicators

From Investing.com: 2024-07-06 05:01:02

Yardeni Research analysts argue against a Federal Reserve rate cut this year, citing improving inflation and economic indicators. Personal consumption data for May shows inflation is on track to hit the Fed’s 2.0% target by year-end. Fiscal policy and strong consumer spending support maintaining current rates.

The firm highlights record federal deficit at 6.7% of GDP during economic expansion and unemployment below 4.0% for 30 months. They warn that fiscal stimulus could overheat the economy and inflation if rates are cut. Labor market and growth indicators suggest maintaining rates as well.

Yardeni Research analysts point to Atlanta Fed’s GDPNow model forecasting 2.2% real GDP growth for Q2, consistent with previous year’s trajectory. The risk of financial market reactions to rate cuts is significant, potentially leading to a stock market melt-up akin to the late 1990s. Staying the course is recommended for the Fed.



Read more at Investing.com: The case against a rate cut this year