Mohamed El-Erian, the Chief Economic Advisor at Allianz, criticized the Federal Reserve for not reducing interest rates in July, warning that the market's anticipation of a 200 basis point cut in the next year is excessive.
What Happened: El-Erian stated that the Fed should have cut rates in July and that the lack of clarity about the future rate cuts is causing market uncertainty. El-Erian voiced his concerns on CNBC's Closing Bell on Tuesday.
"But there's also the question of the destination...They've been ambiguous about that. The market is expecting 200 basis points in the next 12+ months. That would be too much," El-Erian said.
El-Erian predicted a 25 basis point rate cut by the Fed in September. He also highlighted the significance of the upcoming Jackson Hole symposium for Fed Chair Jerome Powell to regain control of the narrative. El-Erian says the market should expect a 150 basis point rate cut by the Fed in the next 12+ months.
"[The Fed] should have cut in July," says @elerianm. "But there's also the question of the destination...They've been ambiguous about that. The market is expecting 200 basis points in the next 12+ months. That would be too much." pic.twitter.com/CVL0bpsh07
— CNBC's Closing Bell (@CNBCClosingBell) August 13, 2024
Why It Matters: The Federal Reserve's decisions are under intense scrutiny as the economic landscape evolves. The July Consumer Price Index inflation report, due for release on Wednesday, could significantly influence investor expectations ahead of the Fed's September meeting.
If inflation slows more than expected, it could bolster the case for a larger rate cut, potentially 50 basis points, in September. Conversely, if inflation meets or exceeds expectations, it may signal a need for a more modest 0.25% rate cut.
Adding to the debate, Brad Case, Chief Economist at Middleburg Communities, argued that the Fed might not cut rates until November. He emphasized the need for sustained economic weakness before considering rate cuts, citing strong consumer spending and rising wages as reasons to maintain current rates.
Meanwhile, Bank of America CEO Brian Moynihan expressed concerns about the potential impact of the Fed's policy on consumer sentiment. He warned that a delay in rate cuts could erode consumer confidence, highlighting the delicate balance the Fed must maintain.
Prominent finance professor Jeremy Siegel also weighed in, urging the Fed to reduce rates swiftly to 4%, although he retracted his earlier call for an emergency rate cut. Siegel emphasized the need for a rapid yet measured approach to rate reductions.
安聯首席經濟顧問穆罕默德·埃裏安批評聯儲局在7月份沒有降低利率，並警告說，市場對明年減息200個點子的預期過高。
發生了什麼：El-Erian表示，聯儲局本應在7月減息，而未來減息缺乏明確性導致了市場的不確定性。埃裏安週二對CNBC的收盤鐘錶示擔憂。
「但是還有目的地的問題... 他們對此一直模棱兩可。市場預計未來12個月內將有200個點子。那太過分了，」 埃裏安說。
埃裏安預測聯儲局將在9月份減息25個點子。他還強調了即將舉行的傑克遜霍爾研討會對聯儲局主席傑羅姆·鮑威爾重新控制敘事的重要性。埃裏安說，市場應該預計聯儲局將在未來12個月內減息150個點子。
@elerianm 說：「[聯儲局] 本應在7月削減開支。」「但是還有目的地的問題... 他們對此一直模棱兩可。市場預計未來12個月內將有200個點子。那太過分了。」 pic.twitter.com/cvl0bpsh07
— CNBC 的閉幕鍾 (@CNBCClosingBell) 2024 年 8 月 13 日
爲何重要：隨着經濟格局的演變，聯儲局的決定受到嚴格審查。將於週三發佈的7月消費者物價指數通脹報告可能會在聯儲局9月會議之前對投資者的預期產生重大影響。
如果通貨膨脹放緩幅度超過預期，則可能爲9月份進一步減息（可能爲50個點子）提供支持。相反，如果通貨膨脹達到或超過預期，則可能表明需要更溫和的0.25％減息。
米德爾堡社區首席經濟學家布拉德·凱斯認爲，聯儲局可能要到11月才會減息，這加劇了爭論。他強調在考慮減息之前，需要持續的經濟疲軟，理由是強勁的消費者支出和工資上漲是維持當前利率的理由。
同時，美國銀行首席執行官布萊恩·莫伊尼漢對聯儲局政策對消費者信心的潛在影響表示擔憂。他警告說，延遲減息可能會削弱消費者的信心，這凸顯了聯儲局必須保持的微妙平衡。
著名金融學教授傑里米·西格爾也參與其中，敦促聯儲局迅速將利率降至4％，儘管他撤回了先前提出的緊急減息呼籲。西格爾強調需要採取快速而謹慎的減息方法。
