Warsh Comments Spark Overreaction in Rate Hike Odds
Investors are overreacting to Federal Reserve Chairman Kevin Warsh's hawkish comments at Jackson Hole, according to Nigel Green, chief executive of deVere Group. Despite the odds of a rate hike rising above 50%, Green believes a September increase would be an overreaction.
Green points out that inflation is easing rather than accelerating, citing July's consumer price index which rose 3.4% year over year, down from 3.5% in June. The monthly gain slowed to just 0.1%. Warsh talked about underlying pressure, but the trend line is cooling, not running away.
The labour market also presents a complication for a rate hike, Green notes. July's jobs report showed the US economy unexpectedly shed 23,000 positions, while unemployment climbed to 4.2%. 'You don't tighten policy into a labour market that just turned negative,' he said.