The Fed is likely to begin a sequence of interest rate cuts - Rosenberg Research

[Percent sign moving down from top stair on blue background.]
Pla2na

David Rosenberg, founder and president of Rosenberg Research, believes Federal Reserve chair Jerome Powell’s recent speech signals not just a September rate cut but the beginning of a sequence of rate reductions.

The chief economist and strategist shared this assessment during an interview with CNBC, noting that while he would have been surprised by this stance a few days earlier, a closer look at the FOMC minutes had shifted his expectations.

“I think this was more than just mildly dovish,” Rosenberg said. “When you read between the lines and you assess the tone, this was not just tipping his hat for a September 17 rate cut. I think this was actually a move towards suggesting that we’re going to be in for a sequence of rate cuts ahead.”

Rosenberg highlighted that Fed staffers have reduced their inflation projections and now expect the unemployment rate to rise above the natural rate by year-end. He emphasized the significance of this forecast, which suggests significant labor market slack will persist through 2027.

“The only ones that actually give a projection are the Fed staffers,” Rosenberg pointed out in the interview.

He also praised Powell for maintaining an economic focus rather than yielding to political pressure. He noted that while Powell did not dismiss inflation risks entirely, the Fed chair’s comments suggest that tariff effects on prices won’t feed into wages due to increasing slack in the labor market. This differs significantly from conditions in 2021-2023 when the unemployment rate was declining and labor markets were tightening.

“If the tariff effect on prices does not feed into wages, then the tariff effect hits the wall in the labor market, and there is no sustainable inflation coming out of this,” Rosenberg explained.

His key takeaway from Powell’s remarks is that tariffs will likely result in negative real incomes rather than future inflation, a critical distinction for understanding the Fed’s policy direction.

MORE ON S&P 500 INDEX:

* EU-USA Trade Framework Should Instill Market Optimism [https://seekingalpha.com/article/4815978-eu-usa-trade-framework-should-instill-market-optimism]
* Do Extreme Concentration And Bad Breadth Signify A Bubble? [https://seekingalpha.com/article/4815927-do-extreme-concentration-bad-breadth-signify-bubble]
* AI Over-Exuberance Comparable To 2000 Internet-Inspired Bubble [https://seekingalpha.com/article/4815977-ai-over-exuberance-comparable-to-2000-internet-inspired-bubble]
* Fed rate cut odds rise after Powell's Jackson Hole speech [https://seekingalpha.com/news/4488363-fed-rate-cut-odds-rise-after-powells-jackson-hole-speech]
* Dow surges to record high as Wall Street rallies on Powell’s Jackson Hole remarks [https://seekingalpha.com/news/4488329-wall-street-rallies-after-powell-speaks-at-jackson-hole]