The Fed isn't ready for cuts right now, 'I think they know that': Fmr. Kansas City Fed President

PCE data showing inflation coming in in line with estimates. San Francisco Fed President Mary Daley saying the recent data is a sign that monetary policy is working. Joining us now to discuss is Thomas Honig, former president of the Kansas City Federal Reserve. Thomas, good to see you. So Mike Santoli was just telling us the data shows us getting closer to a point where the Fed can loosen up. You seem to be saying not so close. Well, I think it's not so close when you think about it. The month over month date on this on the PC it was pretty good, zero and one 10%. But year over year it's still 2.6 down slightly from 2.7. So you still have inflationary impulse in the economy. And I think, I think hopefully the Fed has learned from their what I'll call air of last late last year when they got ahead of themselves with suggesting there's more cuts ahead. When, when the inflation number stays around 3%, which I think it is, and the growth rate is around 2%, you have a pretty much a steady state. And I think inflation will continue to come down in this mildly type position, but very slowly. Not I, I really would be surprised if they suddenly, the Fed suddenly changed his mind and began to talk about rate cuts in September or, or sometime in the fall. OK, well, there's not much year left. So is it your suggestion that there's no clear sign that we need one this year? I, I think there's no clear sign by any means. I think inflation's still fairly high. When you look at the CPI, which is well above 3%, while that's not the Fed's preferred, it's still an important indicator of inflation. And I, and I don't think, I don't think they're ready for cuts right now. And I think they know that. What do you make of the stress test and particularly the point about consumer credit and the stress that certain consumers are feeling? Well, I think that I think the stress test was good to turn towards that issue. Credit card debt has increased, the non performance and credit cards have also increased as well as commercial industrial loans, kind of the mainstay of these banks that are in the stress test. So I think I think those were important tests. They all passed, but I think caution is always a good idea when you're at a higher interest rate environment and the future is a little bit uncertain that as as we go forward from here in terms of growth of the economy so far on track and we'll see how the interest rate effects continue through the end of the year. What broader, broader impact do you think this strong first half performance of the S&P 500 is going to have? Well, I think that's reflecting the fact that they are anticipating rate cuts and and therefore you're you, you kind of have a one side bet. I think clearly everyone knows that the next rate will be move will be down and I think the market recognize that and is pricing that into the into the stock market as they go forward from here. So I think it's it's one follows the other. The environment is that there will be a rate cut, no, no win. But in that environment with the economy doing fairly well, the market should do well as also and it is alright. And one of the things there's still a lot of liquidity in the market. Quantitative tea tightening has been tapered back. There's a lot of liquidity in the market and that's I think food for growth in the stock market going forward from here.