The Federal Reserve must act now and cut rates. February’s inflation report has given policymakers the cover they need to cut rates—and they will, predicts the CEO of one of the world’s largest independent financial advisory and asset management organisations.
deVere Group’s Nigel Green is commenting after the latest US Consumer Price Index (CPI) data shows inflation slowing to 2.8% year-on-year, down from 3% in January.
On a monthly basis, it ticked up just 0.2%, a sharp decline from the prior month’s 0.5% gain. But inflation’s direction is no longer clear-cut.
He says: “Services costs are easing, yet wages are rising at a faster-than-expected pace. Key industries are losing momentum. Inflation expectations have surged in recent weeks. This is not the time for complacency.
“Trump’s tariff threats complicate the picture further. The trade war he is reigniting threatens to push up consumer prices while simultaneously weighing on growth.
“This dangerous mix—pockets of inflationary pressure alongside an economic slowdown—puts the Fed in a precarious position.
“Rate cuts must come sooner rather than later to prevent deeper damage. And we expect the Fed will move on this as the policymakers know the longer they wait, the more it risks a policy error that could tip the economy into a downturn.”
He continues: “This is a moment for the Fed to lead rather than lag. Powell and his colleagues have signalled their data-dependent approach, but the data is clear: inflation is cooling, the economy is slowing, and the risks of inaction outweigh the risks of premature easing.
“A well-telegraphed rate cut cycle would provide a cushion against potential shocks while ensuring that inflation expectations remain anchored.”
For investors, the landscape is evolving rapidly. Interest rate-sensitive sectors like technology, housing, and consumer discretionary stocks stand to gain as borrowing costs fall.
Fixed-income investors should prepare for a potential rally in bonds, particularly in longer-duration assets that would benefit from a Fed pivot.
Currency markets could see renewed pressure on the dollar as rate differentials shift, making emerging market assets more attractive.
Commodities, too, could see increased volatility. Oil and industrial metals may respond to shifting demand expectations, particularly if trade tensions escalate.
Nigel Green concludes: “The world’s largest economy is slowing, inflation’s trajectory is uncertain, and the risks of holding rates too high for too long are growing.
“The Fed is likely to act decisively to ensure stability. Investors who anticipate this shift and position accordingly will be best placed to seize the changing market dynamics. We expect rate cuts are coming— and those who move early will benefit the most.”