Our next guest latest piece points to the Fed interest rate challenge. Rate cuts are now a matter of, if not just when. That’s the headline for his latest piece. Nick Timoros is Wall Street Journal’s chief economics correspondent. And Nick, this week really did throw a big curveball into things. I think people are rapidly trying to rethink when or if the Fed is going to cut interest rates. What are you hearing? Well, Becky, the Fed doesn’t cut for free, right? That’s been the story since the pivot in December. And you needed to see, I think at least one or two things, either weakening in the labor market, a meaningful slowdown in the economy that would certainly get the Fed in a position to cut or you would need to see inflation, you know, coming back down at least to 2 1/2% with evidence that it’s going to get to 2% in a reasonable time frame. And it looked like for the last couple months we might get that. And now after the CPI report on Wednesday, you have to wonder. So you know, this year is beginning to feel a little bit like the reverse of 2015. Of course in 2015 the big question was when was the good the Fed going to do the first hike, When were we going to have liftoff? And at the end of 2014, Fed officials were talking about multiple hikes in 2015 and then the economy kept hitting, you know, pockets of weakness and they pushed back the the, you know, to the end of the year. the Fed only hiked once in 2015. So this feels like it could be like that. The big question is when are we going to have the cuts and right now you’re having to reset the clock because of what happened on Wednesday. It feels a little different than 2015 to me just because I think part of the issue here is the economy is so strong. You know, we haven’t seen that weak economy that would necessarily argue for Fed cuts. Inflation has been the one issue. But I guess if you’re looking at the overall economy, there’s there’s two pretty different takes. If you think this is a situation where the economy is really strong, the jobs market is still kicking along, but inflation is bumping up and down. And the one thing I’d say is yesterday’s PPI number, producer prices were in line with expectations yesterday. So maybe that’s kind of leading to the camp of a bumpy up and down situation before they can get inflation to where they feel more comfortable. Oh yeah, I mean I would say 2015 was the mere opposite of what we have right now. Back then, Fed officials were revising down their projections of the long run interest rate. Now they’re revising it up because the economy has been so strong. And I think you’re right. I mean there are three basic scenarios here. One is that we still have this bumpy path down that the Fed chair, Jay Powell has been talking about. It’s just bumpier. It’s not happening as quickly as maybe we thought when we were looking at those six month annualized inflation rates at or even below 2% at the end of last year. You know, the second scenario, which you have to put a lot more mass on after Wednesday, is that, all right, inflation might just stall out closer to 3%. If you’re looking at the PCE index, maybe it’s a little bit below 3%, but it’s closer to three than to two. And with strong growth, I think that just gets you a high for longer. We just stay here at a 5.3% Fed funds rate for longer. This is, you know, this isn’t the worst thing in the world for the Fed. It does make it harder for them to get onto that golden path that Austin Goolsby is talking about. The the worrying scenario, of course, would be a slowdown in growth with high inflation. That’s the place that the Fed just doesn’t want to be. But it doesn’t feel like that’s where we are right now.
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