Get to steppin’….with lower interest rates.
The Fed needs to drop the hammer on rates at its September meeting to reignite growth and relieve debt pressure on consumers, says BlackRock’s global chief investment officer of fixed income Rick Rieder.
“I would do 50 [basis point rate cut),” Rieder said on my Opening Bid podcast Wednesday (video above; listen in here).
Rieder — a power player in global markets who usually starts his trading day at 3am — fancies the Fed may end up cutting rates in 25 basis point increments at a series of meetings extending into 2025.
But doing so would risk elongating the pressure Rieder is seeing in the mountains of data he studies.
“I was looking yesterday at credit card delinquencies or charge offs, auto loan delinquencies, like you’re starting to see numbers that approach financial crisis. We’re not there yet, but you’re starting to see this significant increase,” Rieder warned.
To be sure, the economy is painting a mixed picture for investors heading into year end. That essentially equates to an uncertain direction for Fed policy, something likely on display throughout this week’s Fed symposium in Jackson Hole.
Earlier this month, markets were stunned following a surprisingly weak July jobs report. The reading sparked fresh fears of a recession and calls for a more aggressive pace of policy loosening by the Fed.
Those concerns were reignited today as the Labor Department reported that monthly payroll figures overstated job growth by about 818,000 in the 12-months ended in March. The revisions are part of an annual process undertaken by the Labor Department.
On the other hand, while the economy has clearly slowed, it’s not falling off a cliff as some doomsayers would suggest.
The latest ISM services report, which includes data on business activity, new orders, employment, and supplier deliveries, clocked in at 51.4%, up from 48.8% in June.
Numbers over 50% are seen as positive for the economy. Most companies in the report said business was either flat or expanding gradually.
A week ago the Commerce Department reported that retail sales rose 1% in July, the largest increase since January 2023, supported by robust gains in online shopping. Sales in June fell a modest 0.2%.
“The consumer is hanging in there,” Walmart (WMT) CFO John David Rainey told me on Yahoo Finance’s Morning Brief, moments after better-than-expected earnings from America’s largest retailer hit the wire.
Rainey added that the back-to-school shopping season is off to a “good” start.
Target (TGT) chairman and CEO Brian Cornell told me this week consumers have responded well to new rounds of price cuts in food and lower inflation. In turn, the retailer grew its store traffic by 3% in the second quarter, following several quarters of challenges.
“The lower recession risk has strengthened our forecasts that they [the Fed] will cut by only 25 basis points at the September meeting,” said Goldman Sachs chief economist Jan Hatzius on Yahoo Finance’s Morning Brief this week.
Hatzius added he expects 75 basis points of rate cuts this year, with the last one coming in December.
Three times each week, I field insight-filled conversations with the biggest names in business and markets on my Opening Bid podcast. Find more episodes on our video hub. Watch on your preferred streaming service. Or listen and subscribe on Apple Podcasts, Spotify, or wherever you find your favorite podcasts.
In the below Opening Bid episode, former Federal Reserve nominee Judy Shelton voices concern on how the Fed assesses inflation.
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Brian Sozzi is Yahoo Finance’s Executive Editor. Follow Sozzi on X @BrianSozzi and on LinkedIn. Tips on deals, mergers, activist situations, or anything else? Email brian.sozzi@yahoofinance.com.
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