VGSH - It's Time To Cut Rates
2024-06-14 06:30:00 ET
Summary
- The Fed should cut rates. July would be the right time to start, in my opinion.
- There are numerous signs that cutting could be appropriate - rising unemployment, rising claims, falling hourly earnings and core PCE that is likely to be at 2.55% in May.
- Cutting in July sets the precedent that they’re starting, and so if they needed to cut again right before the election, it wouldn’t look politically motivated.
I am ready to call it: The Fed should cut rates. July would be the right time to start, in my opinion. To be clear, I don’t think they will do this. I still think the baseline first cut is November, because the next few inflation prints will appear sticky enough for the Fed to keep rates where they are. And the election is too close to the September meeting for them to initiate cuts then. So, I still think November is what we’re looking at. But if I were Jerome Powell, I would cut in July. Here’s why:
If you look at the Roche Recession Rule , (not so) famously named for myself, by myself, you’ll see that there’s been no real cause for concern in recent years. Here’s the problem though - if Thursday’s relatively high jobless claims figure persists through this year (or moves higher), then we are likely to trigger a recession warning, according to this not-so-famous metric....
It's Time To Cut Rates