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00:00We have Peter Cardillo, Chief Market Economist at Spartan Capital Securities, who's joining
00:05us on the show.
00:06Peter, good evening to you and thanks so much for taking the time out.
00:10First, let's start with the inflation print that we've seen in the U.S.
00:16We're looking at, well, mixed cues, at least here in India, while some economists in the
00:22U.S. suggest that the battle against, or rather, the war against inflation is completely won.
00:28There are some others who are a little bit more skeptical with respect to the inflation
00:33number.
00:34And even though this inflation number looks very, very good, there could be perhaps a
00:38few more challenges.
00:40What is your reading as far as inflation is concerned at the moment?
00:44I think inflation is headed in the right direction.
00:47We had the CPI numbers yesterday, and they were very confronting in the sense that we
00:53saw the core rate actually come in a little bit better than expected.
00:58And I think, you know, this is perhaps the first sign that inflation is headed again
01:06in the right direction.
01:07Of course, we had it, you know, over the past four months, inflation heated up.
01:14But I think this time it's going to stick.
01:17One of the reasons that I think that inflation is going to head lower is the fact that energy
01:25prices have not really moved that very much.
01:30They've been basically locked within a trading range.
01:34So energy is a lot that adds to the inflation at the consumer's level.
01:44Of course, salaries have gone up.
01:47But again, if you look at the wage growth over the past two months, they seem to be
01:58stable, and they're not moving much higher than the average that we've seen.
02:06So I kind of think that yesterday's consumer's price index is indicating that we're going
02:16to see lower inflation during the summer months.
02:20Hi, Peter.
02:21Good morning from where we are, Manna here, and great to speak with you as well.
02:27I want to get your take on what you thought of Jerome Powell's tone and what the Fed is
02:34communicating yesterday.
02:36Some are seeing it as hawkish.
02:38Is it really hawkish, considering that they're now seeing at least a clear movement towards
02:43the 2 percent inflation goal?
02:45Yeah.
02:46Look, it's going to take time to get down to 2 percent.
02:51I don't expect that, and I don't think the market expects that, and neither does the
02:54Fed expect that.
02:56But once again, the Fed took a cautious attitude.
03:01And basically, you know, if you sum it all up, what they said is, we're going to do this
03:09on a meeting-to-meeting basis, which means data-dependent.
03:12Yes, they continue to keep a cautious and, I would say, somewhat hawkish rhetoric.
03:26But by the same time, I think, you know, they're ready to pull the trigger.
03:30In fact, you know, during the press conference, Powell did say, if things go our way, we won't
03:40hesitate to cut rates.
03:42If inflation should heat up again, you know, we will obviously not cut, and if necessary,
03:53we will raise rates.
03:54But it's a question of looking at the future data, not only inflation, but of course, you
04:03know, the labor market as well.
04:05And so I think even though, you know, the Dodd plan indicated just one rate cut, I think
04:15that's probably not going to be the case, because I feel that inflation is going to
04:22move in the right direction.
04:24I also think that if the Fed continues to stay on this path of being data-dependent,
04:32the risk of a recession in 2025 grows.
04:39No, but one second, Peter, you said the Fed thinks that there's going to be only one rate
04:46cut.
04:47That's not what you reckon.
04:48Do you think there will be more than one this year, or not at all?
04:52I think if we see inflation for June and July go down and head the right direction,
05:01I think we will see two rate cuts this year.
05:05And so we could probably see one in September, and then the next one in December.
05:13Right.
05:14Peter, what are the immediate challenges at the moment, and what are the, you know, the
05:18top considerations for the next couple of meetings when it comes to the Federal Reserve?
05:23Well, yeah, like I said, in the next meeting, obviously, they're going to probably repeat
05:36what they said today.
05:37Look, the Fed has been quite consistent since inflation, reverse costs, they've been basically
05:47giving the same message to the marketplace, and that is we are going to be cautious.
05:55We don't want to make a mistake.
05:57They don't want to make a mistake on cutting too soon, and they certainly don't want to
06:02make a mistake on keeping rates elevated too high.
06:06The risks are on both sides of the equation.
06:10So I kind of think that, you know, it all depends on the inflation news, and obviously,
06:18the labor, the strength of the labor market.
06:21And the key to the labor market is wages.
06:25If wages modestly move higher or stay around these levels, I don't think that's going to
06:33be a problem for the Fed.
06:34Yeah.
06:35Yeah.
06:36So that's the optimistic outlook, which is great.
06:38I think other houses as well have two rate cuts still penciled in.
06:43We'll wait and see.
06:44PPI data out tomorrow will also be crucial.
06:47Thank you, Peter Cardillo.
06:48Pleasure as always speaking to you.