The Fed is focused on workers to continue cutting rates, says Morgan Stanley Wealth Management
Written by Bansari Mayur Kamdar
(Reuters) – The US Federal Reserve will continue to cut interest rates in November, but policymakers are walking a thin line as inflation is no longer cooling at a fast pace, Morgan Stanley Wealth Management’s chief investment officer said.
The Fed is focused on the labor market which has shown evidence of “mixed pockets”, Lisa Shalett told the Reuters Global Markets Forum (GMF).
“They are not in line with the 2% (inflation) target; they have given up,” he said.
Most Fed policymakers last week gave the green light for more rate cuts in the coming months, and Atlanta Fed President Raphael Bostic said skipping a move in November is likely in order.
“The equity market hasn’t recovered from that yet, but the bond market looks like it’s starting to support the long-term bottom line as high inflation rates are lowered,” Shalett said.
Data last week showed US consumer prices rose slightly more than expected in September and producer prices were unchanged last month.
Traders currently have an 89% chance of a 25-point rate cut at the Fed’s Nov.
Meanwhile, Shalett said he does not expect a clear result on November 5, the day of the US presidential election, given how close the race is.
Last week’s polls had Democratic Vice President Kamala Harris and Republican former President Donald Trump neck and neck in seven battleground states.
“We have encouraged clients to concentrate the position in what we call real assets … including gold, commodities, real estate, energy infrastructure assets,” said Shalett, “hiding” from rising volatile markets.
“We also like market-neutral hedge fund strategies,” he added.
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