the main points
If the Fed follows through with its plans to lower interest rates, it could lead to a stock market bubble, in the view of Neuberger Berman portfolio manager Steve Eisman. Last month, the central bank predicted three potential interest rate cuts of a quarter of a percentage point by the end of 2023, along with many more cuts coming in the coming years. But Eisman, whose bets against the housing market were featured in the movie and book “The Big Short,” said the central bank would be better off simply staying put as the economy shows continued signs of strength and inflation declines. “My view is that the economy is fine. I personally think there should be no cuts from the Fed this year,” he said during an interview on CNBC's “Squawk Box.” “Why cut rates? My real fear is that if the Fed actually decides to cut rates, the market gets bullish and then we're going to have a real problem. So, you know, things are good. The Fed shouldn't do something and then wait until “When to cut interest rates. The data is getting weak.” In fact, markets have become jittery this week as hopes for a rate cut dwindle. In an interview on Friday, Federal Reserve Chairman Jerome Powell stressed that a strong economy and moderate inflation will allow central bankers to be patient in easing monetary policy. A report released Monday from the Institute for Supply Management showed that the manufacturing sector expanded after 16 consecutive contractions. However, the report also pointed to a growing number of companies showing price increases. The Fed's preferred inflation indicator showed a 12-month rate of 2.5% in February, or 2.8% at the core level, which tends to get more focus from policymakers. Both are above the Fed's target of 2%. Futures traders Tuesday morning were pointing to a roughly 58% chance of a first rate cut in June, according to CME Group's FedWatch tool, but the data has been choppy lately as markets try to read the Fed's notes. “Probably the hardest thing to do as a portfolio manager is to do nothing, because it's so easy to do something,” Eisman said. “It's the same thing with the Fed. It's very easy to do something, and they can cut rates when they want to. The hardest thing to do is just sit back and say: OK, everything is fine. Let's sit and wait.” “If things get a little soft, we can cut back.'” Markets will have a big opportunity this week to learn more about the Fed's stance. More than a half-dozen officials are scheduled to speak on Tuesday alone, and Powell will deliver his remarks on Wednesday to the Stanford Business and Government Forum Also on Tuesday, the US Labor Department will release its February jobs report, followed on Friday by the nonfarm payrolls count, which is expected to show job growth of about 200,000 for March. Eisman said all data so far indicates no The Fed needed to rush. “There's still a shortage of jobs, so the consumer is fine,” he said. “It's little bear porridge in a way. Why spoil it by lowering interest rates?”
