Experienced Economist Says, “The Fed Should Not Cut Interest Rates Next Week,” Explains Why

Concerns Over Economic Data and Inflation

Apollo Global Management Chief Economist Torsten Slok has argued that the Federal Reserve should refrain from cutting interest rates at its upcoming meeting. Slok's assessment, shared on CNBC's “Power Lunch” program, suggests that current economic data and market conditions support the continuation of tight monetary policy.

While acknowledging market concerns about a potential worsening credit cycle, Slok presented data indicating otherwise. "When you look at default rates for high-yield bonds and loans, they've been declining for the last six months. So we're not at the beginning of a credit cycle," Slok stated.

Resilient Labor Market and Persistent Inflation

Slok further emphasized the resilience of the labor market. He pointed to historically low levels of unemployment benefit applications and an upward trend in job postings, citing data from Indeed. According to Slok, the slowdown in labor force growth is primarily attributable to a decline in immigration rates, rather than a lack of employer demand. He also noted that inflation remains stubbornly solidified at the 3% level.

Inflation is expected to hover around 3% for the next 12 months. It wouldn't be right to cut interest rates when the Fed's target is 2% and inflation is so sticky.