Optimism for a September rate cut could backfire: Economist

The CME FedWatch tool shows a nearly 100% chance of an interest rate cut in September as some economists join the call for an interest rate cut as soon as this July. Mizuho US Chief Economist Steven Ricchiuto joins Market Domination to discuss the state of the economy and what it signals for the potential of an interest rate cut.
Ricchiuto believes that the most recent economic data shows “an economy that is still very, very resilient.” He continues, “We’ve been data-dependent all along. We came into the year suggesting that there would be a transition in the economy from above-trend growth to trend growth. And that along with that, we’d see some modest easing up of the labor market conditions. But inflation would get stuck at around the 3% level, as opposed to the 2% level. And largely, that’s still the case. The economy looks as if it’s going to average 2% over the first half of the year, which is trend.”
He adds that the current data is showing “the best period of economic information to say we should be cutting rates. But the reality is you haven’t quite hit that test yet of where you should be to really cut rates, and the market wants to adjust so aggressively that it’s creating a financial market environment that I think is providing extra stimulus to the economy. And that could very well preclude a rate cut.”
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