Cohn Warns of Shrinking US Savings Amid Inflation

IBM Vice Chair Gary Cohn has expressed concerns about consumer sentiment in the US. According to him, Americans are spending their savings due to rising energy prices and inflation, despite stable economic indicators such as GDP, employment, and consumer spending. Cohn pointed out that real wage growth has turned negative, with wages lagging behind inflation.

Cohn believes that a recent 25 basis point rate hike by the Federal Reserve aims to curb demand rather than increase the supply of oil, gasoline, or diesel. He noted that yields on long-term securities declined after the decision, leading to lower interest rates for mortgages, auto loans, and credit cards.

When asked about US Treasury Secretary Scott Bessent's purchase of $5 billion in government debt, Cohn emphasized that Bessent's actions are aimed at lowering the cost of long-term borrowing. However, he stressed that ultimately, reducing spending is a responsibility of the US Congress.