On July 31, 2013, an eagle stood on the facade of the Federal Reserve Building in Washington.
Jonathan Ernst | Reuters
Kenneth Akintewe, head of Asian sovereign debt at British fund manager abdrn, said that although the US economy is expected to have a soft landing, there is still the risk of a prolonged slowdown in 2025.
Agentwe asked on CNBC’s “Squawk Box Asia” on Monday: “Is the Fed sleepwalking into policy errors?”
He pointed to economic data such as non-farm payrolls, saying they were later revised to reflect weaker economic conditions. In August, the U.S. Department of Labor reported that the U.S. economy created 818,000 fewer jobs between April 2023 and March 2024 than initially reported.
as part of its initial plans Annual Baseline Revision Regarding non-agricultural employment data, the U.S. Bureau of Labor Statistics said that from April 2023 to March this year, actual employment growth was nearly 30% less than the initially reported 2.9 million people.
“Is the economy already weaker than the headline data suggests and (the Fed) should have started to ease policy,” Akintewe said.
He added that the Fed’s policy changes will take time to affect the economy, “so if the economy is weaker than what the headline data suggests, they will need to accumulate (a) sufficient accommodation, you know, 150, 200 On a basic basis, it takes time.
“Once a certain degree of easing policy is implemented, it will take six to eight months to be transmitted.”
If the economy suddenly shows signs of weakness in early 2025, the economic impact of any easing will not be seen until the second half of 2025, by which time the situation could be “very different,” Akindwe said.
He also suggested that the market is too focused on predicting the scale of upcoming interest rate cuts. “The other question that no one seems to be asking is why is the policy rate still at 5.5% when inflation is down to almost 2.5%? Do you need a real policy rate of 300 basis points, for example, in this environment? We Facing uncertainty?
Data released in the United States on Friday showed that the personal consumption expenditures (PCE) price index, the inflation measure favored by the Federal Reserve, rose 0.2% last month, in line with expectations.
The data appeared to support a modest rate cut, with U.S. interest rate futures pointing to a slim chance of a 50 basis point cut later in September.
Currently, the market expects that the probability that the Federal Reserve will cut interest rates by 25 basis points at this month’s meeting is close to 70%, and the remaining 30% expect that the Federal Reserve will cut interest rates by 50 basis points. CME Fedwatch tool.
—CNBC’s Jeff Cox contributed to this report.
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