Why the Fed Will Cut Late, But Cut More

Matthew Hornbach, Global Head of MacroStrategy, interviews Michael Gapen, Morgan Stanley's Chief U.S. Economist, on the June Federal Open Market Committee meeting. The discussion centers on the Fed's decision to hold interest rates steady, Gapen's prediction of future rate cuts (differing from the Fed's projections), and the impact of tariffs, immigration, and geopolitical events (specifically the Middle East conflict) on inflation, economic growth, and the U.S. dollar. Gapen attributes his differing outlook to the lagged effects of tariffs on consumer spending and the impact of immigration controls on unemployment. They also analyze market pricing of the Fed's policy path and project future movements in Treasury yields and the U.S. dollar, with a focus on the potential impact of rising oil prices.