What Goes Up

Is the Fed Done Raising Rates? Ellen Zentner Thinks So

Sep 22, 2023

Morgan Stanley Chief US Economist Ellen Zentner predicts the Fed is done raising rates, citing cooling inflation. A potential government shutdown by Republicans could further justify maintaining the status quo at the November meeting. Uncertainty and lack of data hinder monetary-policy making. The podcast also discusses the challenges of predicting economic developments, analyzing real interest rates' impact on the economy, and the potential effects of the UAW strike.

39:09

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Episode guests

Ellen Zentner

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Quick takeaways

The US Federal Reserve is likely done raising interest rates, but the possibility of a government shutdown could lead to policy paralysis in decision-making about rate paths.

Ellen Zentner predicts a 40% probability of a recession within the next 12 months, highlighting uncertainties and risks ahead despite the current momentum in the economy for the next six months.

Deep dives

Fed Meeting and Market Reaction

The Federal Reserve opted not to raise interest rates at their recent meeting, but the markets reacted negatively to the projections indicating a less aggressive rate cut next year. This led to a sell-off in both stocks and bonds, with the 10-year treasury yield reaching its highest level since 2007. The statement was seen as more hawkish than expected, with a focus on jobs remaining strong and inflation remaining robust. The Fed's intention to achieve a soft landing for the economy was met with market apprehension.

Introduction

3min

Fed's Hawkish Tone and Economic Outlook

11min

Assessing the Likelihood of Fed Rate Hikes and Forecasting Rate Cuts

4min

Impact of Real Interest Rates on the Economy and Fed's Forecast

11min

The Role of Consumer Spending and the Benefits of Ring Central for Business Communication

2min

Impact of UAW Strike on the Economy

10min

Discussion on Furniture Assembly, Education Expenses, and the Market's Perception of the Federal Reserve

3min

When it comes to the US Federal Reserve’s campaign to crush inflation by raising interest rates, Morgan Stanley Chief US Economist Ellen Zentner says this: “I have a strong view that they’re done here—but they have left the door open.”

Zentner joined the What Goes Up podcast to discuss the Fed’s decision this week to pause rate hikes, and what she expects of monetary policy and the US economy going forward. Cooling inflation should keep the central bank on hold until it’s ready to cut rates next year, she says. In the near term, a potential government shutdown by Republicans would bolster the case for maintaining the status quo at the Fed’s November meeting. A shutdown, she explains, would leave policymakers without all of the economic data they need to make a decision.

“In monetary-policy making, uncertainty tends to lead to policy paralysis,” Zentner says. “If we’re lacking data that the Fed can officially sink its teeth into, then that’s going to lead to an inability to make a decision about the path for rates.”

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What Goes Up

Is the Fed Done Raising Rates? Ellen Zentner Thinks So

Episode guests

Podcast summary created with Snipd AI

Quick takeaways

Deep dives

Fed Meeting and Market Reaction

The Impact of Government Shutdown

Oil Price Shock and Consumer Impact

Economic Uncertainty and Soft Landing

Remember Everything You Learn from Podcasts