Payden & Rygel: Will inflation trends influence the future of interest rates?

Payden & Rygel: Will inflation trends influence the future of interest rates?

September 12, 2024

Inflation
Inflatie (6) begroting

By Jeffrey Cleveland, Chief Economist, Payden & Rygel

The door has slammed on the 50 basis point rate cut talk. I think that's done. I think we've solidified the 25 basis points. And please, I just want to stop talking about the 25 or 50, it's been seemingly every day for the last few weeks. I think we're coalescing around 25

I think you can build a case, though, that by the middle of next year, you need to get a handful of 25 basis points. We think the unemployment rate will be right around 4, 4.1 percent at the end of this year. Maybe drifts up a little bit into the middle of next year, but it will still be quite low. There's a little bit more underlying inflation.  Regarding GDP, I think we're in a growth scare -- we do this from time to time as investors. You know, you get the downward revisions to payrolls. You get a weak payroll reading, as we did in July. And people start talking about recession.

And so they start marking things down. We're still at 2.4 percent GDP growth for this year, Q4-to-Q4. So we still think the consumer has spending power. So we're still pretty upbeat there. So maybe it slowed a little bit. I think you see the evidence for that in payrolls, but not a major slowdown.

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