00:00 Speaker A
Indeed, stocks are hitting new highs today following the Federal Reserve’s 25 basis point cut with the committee also signaling two more cuts could come this year.
00:08 Speaker A
Joining me now, Stephanie Roth, Wolf Research chief economist and John Hilsenrath, StoneX senior advisor. Thank you both for being here.
00:15 Speaker A
Stephanie, I want to start with you because we had the quarter point cut as broadly expected. We have some more cuts now pencilled in. What are you going to be watching most closely to figure out what is actually going to happen? Because as we know, the dot the dot plot is is merely a map, a plan, it’s not a certainty.
00:30 Stephanie Roth
Yeah, it’s all going to come down to the labor market data. and it does it prove that the labor market is largely holding up okay, which is our view and perhaps that’s what’s feeding into bond yields rising today. We got the claims data, it still looks fine. Last week, uh jump in Texas appeared to be an aberration.
00:46 Stephanie Roth
So we’re going to be watching the broad employment data to paint a mosaic of what’s going on in terms of the labor market. And our sense is the labor market is is is okay and we’ll see potentially upward revisions to August in terms of non-farm payrolls, and then the trend in payrolls could look a lot better than what it currently looks at today.
01:03 Speaker A
So, you got payrolls on the one side, maybe holding up all right. On the other side of the Fed’s dual mandate, you have the inflation picture. And John, it feels like the view has really come around that
01:14 Speaker A
maybe the tariff effect will not be that significant. That’s that seems to where to be where perhaps the Fed is is coming. No?
01:22 John Hilsenrath
So yeah, I mean, I think this is one area where Fed Chairman Jerome Powell might be a little bit exposed frankly. So, if you look at the Fed’s 2026 forecast, it’s interesting because they have growth
01:34 John Hilsenrath
improving a little bit. They have the unemployment rate coming down a little bit, which suggests a hotter economy, and they also have inflation receding. So you say to yourself, how does that add up? How do you get less inflation when they think the economy is going to speed up a little bit next year?
01:50 John Hilsenrath
And really, one of the only explanations you come up with, which Jay Powell has said is that they think that the effects of tariffs are going to fade very quickly. Frankly, uh I’m very skeptical of that.
02:02 John Hilsenrath
I think we went through 25 years of globalization that caused downward pressure on goods prices. We’re now unwinding that. I don’t see how that whole process plays out in six to 12 months. I think the Fed is exposed on their inflation forecast.
02:16 Speaker A
Stephanie, what do you think?
02:18 Stephanie Roth
I think it’s fair. We’ll see an environment where inflation is a lot stickier than certainly the forecast. And our expectation is it’s going to be difficult for them to even cut three times this year and then again next year. It’ll be an environment where the the labor market is holding up a lot better and inflation is a bit stickier and
02:30 Stephanie Roth
sticky for a little bit longer. So we’re talking about 3% inflation, let’s just say for a more prolonged period of time, certainly then than than their forecast as John said. Uh and and certainly long longer than Chair Powell kind of alluded to.
