Rate cuts don't stimulate growth, U.S. economy is ‘slowing slowly' – JPMorgan

[Concept Recession Fears on sticky notes on a wooden table with dollar bills]
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JPMorgan Asset Management chief global strategist David Kelly warned that the Federal Reserve's interest rate cuts will not stimulate growth for the U.S.'s economy, which is slowing down.

In an interview with CNBC, Kelly noted that recent economic data, including weaker job numbers [https://seekingalpha.com/news/4492706-us-adds-far-fewer-jobs-than-expected-in-august-unemployment-rate-rises-to-43], indicate a softening economy, saying “the economy is not in recession yet, but it is slowing slowly.”

Moreover, the chief strategist downplayed the potential effectiveness of Federal Reserve rate cuts in reviving economic growth.

“The whole history of the 21st century is rate cuts don’t stimulate growth,” he said, suggesting that lowering rates might actually harm retirees’ interest income while creating a wait-and-see mentality among potential borrowers.

Kelly identified uncertainty as the primary drag on economic performance, dubbing it “the biggest tax that the government levies.” He pointed to changing policies on tariffs, immigration, geopolitics, and the dollar (DXY [https://seekingalpha.com/symbol/DXY]) as factors causing businesses to hesitate on expansion and hiring decisions. “When everybody decides to wait and see, what you see is not good,” he warned.

On the topic of tariffs, Kelly expressed concern about their unpredictable implementation. He advocated for a stable tariff framework, stating that American businesses are “very adaptive” and “very good at growing if you tell them what the rules are.”

Kelly also emphasized that constant changes in trade policy make it difficult for manufacturers to make long-term investment decisions.

Despite current headwinds, he maintained that the U.S. economy should be capable of steady growth. “There’s no reason why this economy should be grinding to a halt,” he said, suggesting that with reduced policy uncertainty, the economy could achieve a steady growth rate of about 2% given America’s “most energetic enterprising people in the world.”

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