Strong Economy Doesn’t ‘Justify’ 4 Rate Cuts This Year: How About 3? What Experts Are Saying

By Anthony Noto•

The economy is too strong to “justify” four interest rate cuts getting priced in by year-end, according to Apollo Global Management‘s Torsten Slok.

What Happened: “Where is the slowdown that everyone’s talking about?” Slok asked CNBC on Friday morning — just after Federal Reserve Chair Jerome Powell expressed confidence that inflation is on a sustainable path back to 2%.

Apollo’s chief economist presented a case:

  • “Businesses are spending,” Slok said.
  • “The guidance in terms of capex is still strong” — particularly with the Magnificent Seven stocks: Apple, Microsoft, Google parent Alphabet, Amazon.com, Nvidia, Meta Platforms and Tesla.
  • During the second quarter, the U.S. gross domestic product (GDP) saw real growth of 2.8%.
  • That’s up from the previous quarter’s 1.4% growth rate, and surpassed 2% estimates.
  • Yes, immigration is up, and labor supply is “going higher,” but there are “no signs” of mass layoffs.
  • Consumers who are highly in debt have it tough, but latest “retail sales are strong.”

“Broadly speaking, it’s just not clear to me that the economy is slowing down this way that justifies four rate cuts the way the market’s pricing at the moment,” Slok added.

See Also: Weaker-Than-Expected Job Market ‘Could Pave Way’ For Fed Rate Cut of 0.5%

Why It Matters: In a Friday speech, Powell refrained from committing to a predetermined path for interest rate cuts.

“The timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks,” he said at the Jackson Hole Symposium. “The time has come for policy to adjust.”

Separately, Evercore founder and senior chair Roger Altman also joined CNBC to discuss the Fed’s inflation fight.

“It’s very hard to pull off a soft landing,” Altman said. “The basic scenario of three cuts, 25 basis points each, between now and the rest of the year, is the base case.”

Other observers disagree with Slok and Altman’s sentiment.

Scott Shellady, aka “The Cow Guy,’ joined Benzinga’s PreMarket Prep Friday morning — prior to Powell’s speech — and blasted the government for “spending hand over fist.”

“We’ve basically spent our way out of not having a recession,” he added.

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