JPMorgan Chase Warns Fed Rate Cuts Could Be ‘Ultimately Negative’ for Stocks, Bonds and US Dollar: Report

A potential rate cut by the Federal Reserve this week could reportedly turn out to be a net negative for the US financial market if it comes about as a result of political pressure and influence, a Bloomberg report says.

The report cites JPMorgan Asset Management’s chief global strategist, David Kelly, saying that a rate cut this week could “ultimately be negative for stocks, bonds and the dollar” as it could reduce rather than increase demand.

“To the extent that the Fed’s decision this week is seen as a capitulation to political pressure, a new layer of risk is being added to U.S. financial markets and the dollar.”

The Bloomberg report further cites Kelly arguing there’s currently little to justify a rate cut by the Federal Reserve.

“By the fourth quarter of this year, inflation could be 1.2 percentage points above the Fed’s target and rising, while unemployment would be just 0.3 percentage points above their target and stable. If this is the outlook, why should the Fed cut at all?”

Last week, in a Bloomberg TV interview, Kelly said tariffs could exacerbate inflation in the US while slowing economic growth.

“I think the economy is gradually grinding to a halt here… On inflation, these numbers are very close to in line with what we thought… Inflation is gradually going up. The economy is gradually slowing down. That’s what we thought tariffs are going to do. It’s going to slow growth, and it’s going to add to inflation…

…Businesses don’t want to hire here. I don’t think there’s a huge ongoing jump in layoffs, but it’s getting harder and harder to find a job, because businesses are just frozen, because they don’t know what the playing field is going to be with regard to tariffs going forward.”

 

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