Kathryn Rooney Vera, Chief Market Strategist at StoneX, appeared on CNBC's Squawk Box to share her views on the Fed's policy outlook.
Despite ongoing concerns about inflation and economic growth, Vera suggested the Fed could implement two rate cuts this year, but not until the second half.
“Stock markets are closed today for the funeral of former President Carter, but investors are awaiting tomorrow’s employment report,” Vera said, expressing cautious optimism about the U.S. economy while acknowledging ongoing inflationary pressures and fiscal challenges.
Asked about inflation, Vera said that continued economic growth above potential could further increase inflation. “If the State Productivity Department is not successful in reducing spending, then I would be more concerned about inflation,” Vera said, urging markets to be vigilant.
The U.S. economy, which grew by 1.8% last year above its projected potential, is expected to maintain a similar momentum through 2025. However, Vera warned that this growth could be inflationary in nature, especially if significant fiscal tightening is not implemented.
Vera believes the Fed is unlikely to make further policy changes in the near term. “The Fed is on hold for now and probably for the foreseeable future,” he said. However, he warned that inflation exceeding 3.5% could prompt the central bank to reconsider its neutral stance.
Vera said it was important to be prepared for alternative scenarios, although he predicted two rate cuts in 2025. “What I tell our clients is to protect yourself against the risk that the Fed doesn’t cut at all,” he said, pointing to the potential for stronger-than-expected economic growth to delay policy easing.
Vera also touched on global investment trends, noting that global private investment is approaching record levels, which she described as a positive signal for economic growth. However, she stated that structurally high inflation could continue to be a problem in the medium term.
*This is not investment advice.
