Grant Cardone is stirring the pot again. The entrepreneur and real estate mogul tweeted: “US inflation of 2.7% is higher than the real economy. The FED is behind and KNOWS it. Look for a surprise cut of 0.50 basis points in December.”
Cardone’s position is bold, but not without reason. Inflation was 2.7% in November, slightly above the Federal Reserve’s target of 2%. Despite a series of rate hikes this year, Cardone thinks the Fed is behind the curve. And he’s not the only one to point this out.
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The Fed has been trying to cool inflation for months without taxing the economy. The central bank has raised interest rates to the highest level in twenty years. However, Cardone suggests that this approach may not work fast enough, implying that a major course correction could take place.
A surprise rate cut of 50 basis points would be a shock. Most analysts expect the Fed to remain stable or make modest adjustments. Such a big blow could signal serious concerns about the health of the economy – or a change in strategy to boost growth.
Opponents of Cardone’s view argue that inflation is not the only measure the Fed takes into account. The labor market remains strong, with unemployment near historic lows. Wage growth is also stable. For some, these are signs that the economy is holding up well.
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Michael Feroli, chief US economist at JPMorgan Chase, recently said: “Regardless of exactly what policies are put in place, a change in the party that occupies the White House creates a number of new uncertainties for the economy. This argues for a more gradual pace of interest rate cuts. .” JP Morgan Research predicts the Fed will cut rates by another 25 bps in December, and only once a quarter through 2025.
After all, the Fed’s focus is broader than just inflation. A sudden interest rate cut could risk the economy overheating again.
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Others worry about credibility. A dramatic turnaround could send mixed signals to the markets. The Fed has worked hard on stability and prudence in recent years, but a surprise cut could disrupt that.
