“I’m expecting a few more rate cuts, but there’s a lot of division amongst the committee.” – 01:09
José Torres, Senior Economist at Interactive Brokers, joins Remy Blaire at the New York Stock Exchange to discuss the current state of the U.S. economy and the Federal Reserve’s monetary policy.
The segment opens with Remy highlighting the growing dissent among Federal Reserve officials regarding the future direction of monetary policy, particularly as signs of instability emerge in the labor market. Fed Chair Jerome Powell has reiterated a cautious approach to further rate cuts while leaving the door open for potential easing. He also describes stock valuations as fairly high, prompting a deeper examination of the implications for investors.
José shares his insights following the September Fed meeting, where a 25 basis point rate cut was implemented as expected. He anticipates additional rate cuts, despite the divisions within the committee, particularly concerning inflation driven by strong consumer demand in the services sector. The conversation shifts to the recent GDP revision, which shows a significant upgrade to 3.8%, and José emphasizes the role of robust consumer spending and business investment in indicating a re-accelerating economy.
As they look ahead, Remy and José discuss the implications for the American consumer. Jose expresses optimism, noting the stability of the labor market. While hiring is slowing, he points out that layoffs have not increased significantly, suggesting that the consumer remains in a strong position. He highlights the positive effects of strong capital markets on various income cohorts and predicts growth in the latter half of the year.
The discussion then turns to the looming government shutdown deadline, with predictions indicating a 60% chance of some form of shutdown on October 1st. José reflects on the historical impact of past shutdowns on the markets and the current political landscape, where bipartisan agreement appears difficult, particularly around contentious issues like Medicaid cuts and healthcare subsidies.