• Fundstrat Global Advisors managing partner Tom Lee thinks the U.S. Federal Reserve is done raising its benchmark interest rate.
• The Consumer Price Index (CPI) is typically used as a proxy to track inflation rates, and last week’s CPI report indicated consumer prices rose 0.2% in July.
• Many stock market traders don’t share Lee’s optimism, with investors having pulled $115 billion out of the stock market this year and mortgage rates potentially dropping to 5.5%.
Fed Is Done Raising Interest Rates
Fundstrat Global Advisors managing partner Tom Lee believes that the U.S. Federal Reserve is done raising its benchmark interest rate as inflation appears to be on a path lower. In an interview with CNBC, Lee expressed his optimism about the current market and inflation numbers.
Consumer Price Index (CPI)
The Consumer Price Index (CPI) is typically used as a proxy to track inflation rates, which traders keep a close eye on as it could signal whether or not the Fed would continue to raise interest rates. Last week’s CPI report indicated consumer prices rose 0.2% in July, which was “at market expectations” according to the White House reports.
Stock Market Traders’ Optimism
Despite Lee’s optimism about inflation numbers, many stock market traders do not share his sentiment – investors have pulled $115 billion out of the stock market this year and some believe that mortgage rates could drop significantly to 5.5%. This could lead to further economic stimulus if the Fed does indeed end its rate hike cycle at this time and U.S 10-year treasury note holdings remain at 4%.
Impact of Lower Interest Rates
If mortgage rates decrease from their current levels due to lower interest rates set by the Fed, it could result in increased spending power for consumers which would provide additional economic stimulus for businesses in affected areas . This could help alleviate any potential hard landing scenarios that some are predicting may happen in 2020 if monetary policy remains unchanged or worsens further than expected levels of economic activity over time .
Tom Lee believes that given recent data from CPI reports indicating consumer prices rising only by 0 . 2%, it appears likely that monetary policy will remain constant or even loosen further depending on other economic indicators such as unemployment figures and GDP growth rate . This could result in more favorable conditions for businesses and consumers alike , leading towards increased economic stimulation for those involved in various industries dependent upon spending power .