By coinnews 
00:00 Speaker A
Michael, if we do see the that happening, that quick change in data, I guess I would ask, first of all, do you expect that to happen, and do you expect the Fed to be, if it does cut rates, how much is that actually going to help? I mean, I know you’re more on the investor side than the economist side, but I’m I’m curious to get your take.
00:27 Michael
So, I don’t think that the Fed will aggressively cut rates. It seems like it will be a methodical approach to this, uh, and I don’t think that the data will change all that much between now and the next meeting. I think Chairman Powell kind of addressed that. Now, personally, I have two bones to pick with Chairman Powell. First, in November, he said that the Fed doesn’t guess, doesn’t speculate, or assume, but yet, when it comes to tariffs, that’s exactly what they’re doing. They’re assuming that tariffs are inflationary. And in fact, that wasn’t the case in 2018. They were not inflationary. And we all talk about this notion that tariffs are a tax, and taxes reduce economic growth. And so, for me, I think there’s this kind of misplaced fear that inflation will be rising. The second part of this is, I disagree with this notion that we’re in a good place already and we have time to wait. It’s almost as if we’re waiting for the accident to happen before we react, and that’s what I’m most concerned about. So, at four and a quarter and four and a half and your core inflation measure at 2.6, you already have the opportunity to cut rates three to four times, 25 basis points each, and still be 1% above your preferred measure of inflation. So, to me, I think the Fed is too tight. So, those are my two big bones to pick with the Fed and my two big concerns here in the next, kind of, few meetings.
02:36 Speaker A
So, Mike, let me let’s just put a fine point on this. So, you think the Fed is too late and you are much more concerned about growth.
02:46 Michael
Absolutely. I think that the inflation fears are misplaced. I think inflation’s cooling. I have the PCE numbers here in front of me. So, it was 2.9 in December, 2.7 in January. Certainly, we had a little bit of a hiccup in February, it’s 3.0, this is Core PCE, what we all claim is the Fed’s preferred measure, we’re at 2.6 and we had a 0.0 month over month in the most recent month. So, the fears, and somebody asked them this during the press conference, the fears are that it’s tariffs that will result in an uptick in inflation. There’s no other data that suggests that this inflation will tick up other than that, and I just disagree that tariffs will be inflationary. In fact, I think that that that’s a mistake. It’s a mistake they made in 2018. So, the Fed never hurries until it’s too late, and then they have to catch up, and I’m afraid that that might be the case this time around as well.
04:17 Speaker A
Luke, let’s bring you back in here. Do you do you, now you’ve been listening there, do you share Michael’s views and and broad concerns there?
04:29 Luke
Well, I certainly don’t think that inflation is a problem. You know, total PCE down to 2.3% when you remove the shelter component, which we know has this weird lag that takes a long time to catch up, but the entire PCE minus shelter, the Fed’s already been at their target for 12 months, and like Michael, I don’t think that there’s any threat of it advancing higher. I think I don’t think consumers are in a strong enough place to push inflation higher. I understand why the Fed would be guarding against the upside. Uh, they don’t want to make that mistake twice. Uh, and then the other thing is if they’re late by one meeting or two meetings, there’s not a whole lot that 25 basis points or 50 basis points is going to do to help the economy over the course of 7 or 14 weeks because the recession that we think we’re heading into has to do with a very large tax. You know, it’s 2.6% of GDP, $780 billion based on 2024 trade, and there’s not really anything that the Fed can do to stop that from happening. And if we persist with the tariffs, even if they’re, you know, 10% on all countries and 25% on China, and we’re trying to move things domestic production, well, that’s a huge, huge investment move that needs to happen, and it’s going to cause a slowdown and sort of a hiccup, and there’s nothing the Fed can do about that. So, I I agree with Michael’s assessment that inflation is not a problem and the Fed is going to end up cutting. I don’t think that 7 or 14 weeks is going to make much of a difference at all. So, that’s what I I think will end up happening.