“I believe Fed will have a dovish communiqué and open the window for an eventual cut.”
US Fed to pave the way for a rate cut down the road and this may not be happening during the summer either, says Peter Cardillo, Chief Market Economist, Spartan Capital Securities, in an interview with ETNOW.
What are you expecting the Fed to do? Will they go ahead with the rate cut or guide towards the rate cut through the course of the year?
I do not think they are going to cut rates. They basically will pave the way for a rate cut down the road and I am not so sure it is going to happen during the summer either. First of all, we need to gather more evidence in terms of the economy slowing down. Indeed, some macro indicators have been weak but there has been some strong macro indicators as well. Last Friday, we saw IIP figures. The jury is still out there on economy weakening to the point that we could wind up in recession.
The other thing is that yesterday President Trump tweeted that he is going to have an extended meeting with the President of China and that renews hopes of some sort of a trade deal which I believe is coming soon. It does not mean that we are going to get the trade deal the administration is looking for. It will be something that somewhat cosmetic in the sense that there will be some agreement and talks will continue to go on. With that in mind, the Fed will have to be very careful in lowering rates anytime soon.
There are lots of things that the Fed needs to observe. I believe they will have a dovish communiqué and will open the window for an eventual cut but it is not going to come tomorrow.
When we talk about what is happening with various global bankers around the world, do you think a dovish commentary is something which has changed in the last 12 months?
Absolutely. Look at the Chief President of ECB, Mario Draghi. He indicated yesterday that he is open to more stimulus and basically paving the way for a rate cut going down the road. China has been stimulating their economy and there is no question the global economy has weakened and some of these economies need crutches again.