In his assessment on the Power Lunch program, he argued that the FED should not implement a rate cut in the meeting scheduled for next week.
Slok stated that current economic data and market conditions indicate that a tight monetary policy should be maintained.
Although there are concerns that the credit cycle in the markets may worsen, Slok expressed that the data shows the opposite. Slok said, “When you look at the default rates for high-yield bonds and loans, we see that they have been declining for the past six months. Therefore, we are not at the beginning of a credit cycle.”
Pointing out that the labor market has maintained its resilience, Slok argued that unemployment benefit applications are at very low levels and that, according to Indeed data, job postings are on the rise. Slok noted that the slowdown in labor force growth is not due to a lack of demand but rather a decrease in migration rates, and reminded that inflation is still solidifying at around 3%.
It is expected that inflation will remain around 3% over the next 12 months. It would not be correct to lower interest rates while the FED's target is 2% and inflation is so sticky.
Stay tuned for new developments.
