The “Federal Reserve Rate Cut Reflexivity Paradox” (or “Why the Fed aint gonna cut in 24”)

Torsten Slok is chief economist at Apollo Global Management. He’s been covered in financial media earlier this week say the the Federal Open Market Committee (FOMC) won;t be cutting the Fed Funds rate this year.

He highlighted ten reasons, which can be lumped into three areas of concern:

Inflation, he says:

  • “Underlying measures of trend inflation are moving higher”
  • helping this along “the labor market remains tight, jobless claims are very low, and wage inflation is sticky between 4% and 5%”


  • “Growth expectations for 2024 saw a big jump following the Fed pivot in December and the associated easing in financial conditions”
  • “Growth expectations for the US continue to be revised higher”

The stock market:

  • “financial conditions continue to ease, which is bolstering M&A markets, credit markets, IPO activity, and, of course, equities”

What hasn’t got so much press is his “Fed Cut Reflexivity Paradox”:

  • the more dovish the Fed sounds, “the more financial conditions will ease, making it more difficult for the Fed to cut,”
  • since the FOMC started talking about cuts in November, U.S. stocks have rallied and “the household sector has experienced a windfall.” Government spending is also providing “a significant tailwind to the economy”

Powell won’t be needing that for a while.

This article was written by Eamonn Sheridan at Source