The possibility of a rate hike is “the least expensive risk in the market right now,” says Breitbart economics editor John Carney. Said FOX Business host Larry Kudlow said in an interview Monday.
Kudlow said Monday’s Institute for Supply Management (ISM) survey of business executives, as well as Friday’s explosive jobs report, showed the economy was heating up, and that the U.S. Federal Reserve This raises doubts about Wall Street’s expectations that the Federal Reserve will cut interest rates multiple times this year.
“We’re talking about the economy being too strong to cut rates, but today’s ISM services numbers were very strong,” Kudlow said.
“That’s right. It’s been much hotter than expected,” Carney said, noting that Monday’s survey showed “the largest month-over-month price increase from December to January in 12 years.”
Carney reported to Breitbart:
Two indicators on the services side of the economy showed an increase in activity in January on Monday.
of Supply Management Association Survey of business leaders signaled the 13th consecutive month of expansion in the services sector in January. The company’s Purchasing Managers Index rose to 53.4%, beating Wall Street’s expectations of 52.1.
The gains more than reversed a decline in December, when the index fell to a seven-month low of 50.5. This was the highest reading since 53.6 in September, when the overall economy was expanding at an annualized pace of 4.9%.
A similar index from S&P Global was also stronger than expected. The S&P Global PMI for the US services sector suggested it is expanding at its fastest pace since June 2023.
New orders, a key indicator of demand, grew at a faster pace. Not only domestic customer demand but also export demand improved, resulting in the fastest growth since August last year.
“That means inflation is accelerating again, which is not surprising.” [by] “When I looked at the jobs report that just came in, it showed an increase of 353,000 jobs,” Carney told Kudlow. “When you try to bring that many people into the workforce on the payroll, the demand naturally increases.”
“What no one is talking about is what are the chances that the Fed’s next action will be to raise rates?” Kudlow asked.
“I think it’s much higher than zero. That’s what the market has priced in,” Carney said. “This is the cheapest risk in the market right now. If inflation continues to heat up and we get jobs numbers like we saw in January, I think there’s a good chance the Fed will need to raise rates. , I think the earliest it would be cut would be in July. Then they would have to take a break in September, because taking a break right before an election would be a big problem. Probably in November and December if inflation is calm. There will be another rate cut. That’s three cuts. There are about five in the market right now. They won’t do that.”
“We’re not going to cut rates until the morning of President Trump’s inauguration,” Kudlow quipped.
Carney suggested that concerns about the politicization of the Fed are exacerbated by how Fed officials present themselves to the public.
“I think the Fed, especially Mr. Powell, made a mistake,” Carney said. “One, I don’t think it’s a good idea to attend a press conference after every meeting. Two, it’s a mistake to stand at the podium as if you’re an elected official. Because he answers questions like an elected official and then goes on TV and gives a more personal interview like an elected official. The Fed is a political authority. This will actually politicize the Fed, because the more people act like they are, the more people will treat the Fed that way.”
Rebecca Mansour is a senior editor at Breitbart News. Follow her on X @Ramsour.
