After the interest rate meeting in March, the Federal Reserve stood for three interest rate cuts by the end of 2024 – albeit with a minimal majority in the interest rate committee (FOMC). Celebrity investor Steve Eisman advises the Fed to sit quietly in the boat.
– My opinion is that the economy is doing well. I personally believe that the Fed should not cut interest rates this year. Why should they cut? My actual fear is that if the Fed were to actually cut, they risk creating a stock bubble and then we have a real problem. The Fed should do nothing and then wait until the macro numbers show weakness, he tells CNBC.
The Neuberger Berman manager believes the US central bank would be better served by not making any changes as the economy continues to show continued strength, while inflation is easing.
– There is still a lack of jobs, and the consumer is doing well. So why ruin it by lowering interest rates? asks Eisman.
Hope is waning
According to the website, hopes for imminent interest rate cuts have waned after Friday’s signals from Fed chief Jerome Powell that a strong economy and moderate inflation allow central banks to be patient with interest rate cuts.
A report from the Institute for Supply Management (ISM) on Monday showed increasing activity in the industry after 16 consecutive months of decline. Figures released on Good Friday showed that core PCE, the Fed’s preferred inflation indicator, rose 2.8 percent year-on-year in February, down from a revised 2.9 percent in January.
If the direction is correct, the figure is well above the US central bank’s inflation target of 2 percent. On Tuesday, the market priced in just over 56 percent probability that the first interest rate cut will come in June.
Eisman previously ran a hedge fund at FrontPoint Partners, and shorted American “subprime” mortgages before the financial crisis in 2008, as Michael Lewis described it in the book “The Big Short”. This book laid the foundation for the subsequent Oscar-winning film of the same name.
