Jim Bianco thinks the economy is too strong for a soft landing, inflation has been bottoming.
Notes:
- On CNBC, Wasn’t surprised by Powells speech because it confirmed what the market was expecting – rate cuts in September. The takeaway is we don’t know how far they will go after that.
- Powell implied that the labor market will take center stage and the fed will be focusing there to guide future rate cuts.
- Bianco is in the “no landing camp” – says the economy is doing better than a soft landing. Warns that the rate cuts priced in the market could set the stage for sticky inflation into 2025.
- This could turn out to be similar to December last year where Powell said we are confident we are not he way to 2%, and then inflation shot back up in January. That could put cuts on hold for the rest of the 2024.
- Notes it is possible inflation bottomed a year and a half ago on CPI at ~3%. Notes its taken a year and a half to go from 3% to 2.9%.
- Jim Bianco says the fed is basing everything on the weakening in the labor market, but the data in the labor market is very mixed. Notes there is an argument that we have had a big expansion in the labor force because of illegal immigration. That has led Claudia Saha to say her indicator may not be correct. Powell didn’t address migration impacts on the labor market.
