BlackRock: Fed in no rush to cut rates
Hierbij een reactie van Roelof Salomons, Chief Investment Strategist bij vermogensbeheerder BlackRock, op de bijeenkomst gisteren van de Federal Reserve.
The Federal Reserve kept rates on hold and is biding its time until it has more clarity on the tariff impact. Fed Chair Powell pointed to a strong economy: unemployment is low, we’ve seen little pick up in layoffs, wages are growing at a healthy clip and labor demand is slowing broadly in tandem with labor supply. That characterisation suggests that the Fed is in no rush to cut rates and its revised 'dot plot' showed a slightly higher expected rate path versus March, with two quarter-point cuts expected before the end of the year.
We think the Fed is now recognizing the supply-driven nature of this environment. Think slowing workforce growth and rewiring supply chains. We’ve long pointed to the tougher trade-off this leaves the Fed between protecting growth and curbing inflation. Chair Powell said he expected tariffs would deliver a 'meaningful amount of inflation' in coming months. And while the Fed’s base case seems to be that tariffs will have a one-off impact on inflation rather than a more lasting one, it is clearly acknowledging the possibility that inflation could prove more persistent, depending on the size and duration of tariffs – and revised up its inflation forecast for the next few years slightly.
Even so, we think the Fed is understating the extent of future inflation pressure. In particular, we think current wage growth, at close to 4% on an annualized basis, is still too high for inflation to settle back at 2%. The gap between core inflation and wage inflation is now near its widest in four years, meaning that unless wage growth slows, companies will need to accept a margin squeeze or inflation will tick up again soon, even before accounting for the tariff impact.
Surveys by the National Federation of Independent Business suggest companies are ready to hike prices in response to tariffs, but they too are likely biding their time for now. Longer term, we see ongoing inflation pressure from mega forces like the AI buildout, aging populations and geopolitical fragmentation limiting how far the Fed can cut.