Grant Cardone stirs the pot again. The businessman and real estate magnate tweeted: “US inflation of 2.7% is higher than the real economy. The FED is behind and KNOWS it. Watch for a surprise 0.50 basis point cut in December.”
Cardone’s opinion is bold, but not without reason. Inflation was 2.7% in November, slightly above the Federal Reserve’s 2% target. Despite a series of rate hikes this year, Cardone believes the Federal Reserve is behind the curve. And he is not the only one who points it out.
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The Federal Reserve has been trying to cool inflation for months without tanking the economy. The central bank raised rates to their highest levels in more than two decades. However, Cardone suggests that this approach may not be working fast enough, implying that a major course correction could be coming.
A surprise 50 basis point rate cut would be a surprise. Most analysts expect the Federal Reserve to hold steady or make modest adjustments. A big cut like this could signal serious concern about the health of the economy – or a change in strategy to stimulate growth.
Opponents of Cardone’s view argue that inflation is not the only metric the Federal Reserve considers. The labor market remains strong and unemployment is approaching historic lows. Wage growth is also constant. For some, these are signs that the economy is holding up well.
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Michael Feroli, JPMorgan Chase’s chief US economist, recently said: “Regardless of exactly what policies are introduced, a change in the party that occupies the White House creates some new unknowns for the economy. This argues for a more gradual pace of interest rate cuts. JP Morgan Research predicts the Federal Reserve will cut rates another 25 basis points in December, with cuts only once per quarter in 2025.
After all, the Federal Reserve’s focus goes beyond inflation. A sudden rate cut could risk overheating the economy again.
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Others worry about credibility. A dramatic turnaround could send mixed signals to markets. The Federal Reserve has worked hard to project stability and caution in recent years, but a surprise cut could upset that.