The Federal Reserve (Fed) is set to meet later this week as investors speculate when the central bank could cut rates. We believe the Fed will decline to cut its policy rate at this meeting, but may begin easing as early as July. The advent of an easing cycle will remain data dependent, and this chart highlights why the Fed could make the case for cutting rates by Fall 2019. Unit labor costs have weakened in 2019 and may presage stagnant inflationary pressures. If inflation remains soft and job creation continues to decelerate, a potentially potent combination of weakening corporate profits and slower GDP growth could be the lynchpin for a Fed rate cut.
Groupthink is bad, especially at investment management firms. Brandywine Global therefore takes special care to ensure our corporate culture and investment processes support the articulation of diverse viewpoints. This blog is no different. The opinions expressed by our bloggers may sometimes challenge active positioning within one or more of our strategies. Each blogger represents one market view amongst many expressed at Brandywine Global. Although individual opinions will differ, our investment process and macro outlook will remain driven by a team approach.