The Fed Is Done Raising Interest Rates As Inflation on Path Lower, Says Fundstrat’s Tom Lee

Fundstrat International Advisors managing companion Tom Lee thinks the U.S. Federal Reserve is finished elevating its benchmark rate of interest.

In a brand new interview with CNBC, Lee says that’s he optimistic in regards to the market and inflation numbers.

“I believe [last week’s] CPI (client value index) report sort of exhibits that inflation’s on a glide path decrease. The issues which are nonetheless inflationary – like auto insurance coverage, motorized vehicle restore – aren’t issues the Fed’s essentially attempting to focus on with greater charges, but it surely’s extra of a supply-chain work-through.

So I believe over the following three months, we might see core CPI at 0.2 or much less. That will actually enable the Fed to breathe simpler, and that’s why I believe the final hike was July.”

The Shopper Worth Index (CPI) is often used as a proxy to trace inflation charges. Merchants maintain an in depth eye on the metric because it might probably sign whether or not the Fed would proceed to lift rates of interest.

Final week’s CPI report indicated client costs rose 0.2% in July, which the White Home described as “at market expectations.”

Lee, nonetheless, notes that many inventory market merchants don’t share his optimism.

“I don’t suppose individuals are even that bullish. I imply this week everybody’s been fast to show bearish. One simply has to take a look at the feedback from a whole lot of of us and so they’re already again within the laborious touchdown camp…

But we all know traders pulled $115 billion out of the inventory market this yr and there’s $500 trillion in money, and mortgage charges might drop fairly dramatically. If the Fed is finished and the [US 10-year treasury note] stays at [4%], mortgages ought to drop to five.5%. That’d be vastly stimulative subsequent yr.”

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