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David Mericle, Goldman Sachs' Chief US Economist, recently appeared on Bloomberg's 'Closing Bell Overtime' to discuss the economy, potential interest rate cuts and more.
Mericle's comments came after the June personal consumption expenditures (PCE) index, the Fed's preferred inflation gauge, rose 2.5 percent from a year ago, in line with forecasts. This led to speculation about whether signs of a slowdown in inflation would accelerate the FED's interest rate cut schedule.
When asked about the possibility of a rate cut in September, Mericle said he was sympathetic to the idea but doubted its likelihood. He stated that the FED will make a statement at the next meeting that will imply that a rate cut is imminent, but this is not definitely planned for the September meeting.
Mericle believes the Fed will wait until July inflation data is released. If the data is acceptable, he expects the FED to indicate that it will cut interest rates in September.
Despite the ups and downs in inflation data this year, Mericle finds its inflation strategy convincing. He noted that the labor market had rebalanced and inflation expectations had normalized by the end of last year.
Mericle also touched on the Fed's double duty and the recent shift in focus towards the Fed due to softer labor market data. Describing labor market data as mixed rather than weakening, Mericle pointed out that GDP grew by 2.8 percent last quarter and the latest payrolls were over 200,000.
Going forward, Mericle projects that approximately 150,000 jobs per month will be needed to stabilize the unemployment rate. He noted that the signals are mixed and that the upcoming jobs report will likely attract more attention than usual due to an upward trend in the unemployment rate.
*This is not investment advice.