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  • Fed Will Start With 25 Bps Rate Cut, PGIM's Tipp Says

Fed Will Start With 25 Bps Rate Cut, PGIM's Tipp Says

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Bloomberg Sep 11 21:46 · 31.1k Views

Robert Tipp, PGIM Fixed Income chief investment strategist, says the anxiety about the US economy has shifted to employment and away from inflation on Bloomberg Television.

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  • 00:00 How do this week's CPI print that we got today and of course, tomorrow's PPI print that we're getting tomorrow, how much will that answer the question of whether the Fed cuts 25 or 50 basis points or do we need to see the employment data for the Fed to make that final determination,
  • 00:15 right?
  • 00:15 I mean, I think we have all the information we need.
  • 00:17 I think that
  • 00:18 the differences
  • 00:19 between, say, the
  • 00:20 US and Europe,
  • 00:22 services in Europe
  • 00:23 are sticky.
  • 00:24 The inflation rate is high and the wages
  • 00:27 inflation is running high relative to productivity
  • 00:30 in the United States.
  • 00:31 It's really the rents, it's not the wages.
  • 00:33 So
  • 00:34 I think the the Fed's degree of anxiety on inflation
  • 00:38 is something that they're going to watch, of course, but I think the anxiety is gone.
  • 00:41 I think the anxiety has shifted 100%
  • 00:44 for all practical purposes, to employment.
  • 00:47 Employment that as of June, looking backwards, was growing at a really solid pace.
  • 00:52 You could quibble about whether you like the kinds of jobs being created,
  • 00:55 but it was a solid pace.
  • 00:57 Now, between the prints that we've seen in the revisions,
  • 01:01 excuse me, you have a rising unemployment rate and an unacceptable rate of job growth.
  • 01:05 And so the Fed, I think it's going to start with 25.
  • 01:09 Before they went into the blackout.
  • 01:11 They did not signal 50.
  • 01:13 But I think what we're going to see from them
  • 01:15 is a desire not to alarm anyone,
  • 01:18 but the notion that they may need to be neutral or accommodative.
  • 01:23 They need to bend the line.
  • 01:24 They need to get a little bit higher rate of job creation at this point.
  • 01:28 And frankly, for most of the components of inflation, they're running below pre COVID levels, which if you recall
  • 01:35 was when they were going from 2 3/8 into the ones with an unacceptably low rate of inflation.
  • 01:40 So this is 180° turn around from where they were three months ago.