Jeffrey Gundlach on Unreliable Economic Data and Fed Rate Cuts

Federal Reserve's Interest Rate Decision

• 🎯 The Federal Reserve's decision not to cut interest rates is considered up for debate, especially following a week of significant economic data releases.
• 💡 Fed Chair Jay Powell's comments suggested a focus on efficiency in manipulating the Fed funds rate, relying on upcoming inflation and jobs data.
• ⚠️ Powell characterized the Fed's position as being at their employment target but not their inflation target, a stance that seemed anachronistic after the latest jobs report.

Questionable Economic Data Reliability

• 📉 Economic data, particularly the jobs report and CPI, is becoming increasingly unreliable.
• 📊 Survey response rates for the jobs report have fallen to around 60%, and imputed prices now constitute 35% of CPI inputs, up from 8% several years ago.
• ⚠️ This lack of reliability is causing concern and potentially influencing market expectations for Fed actions.

Market Reaction and Future Rate Cuts

• 📈 The gap between the Fed funds rate and the 2-year Treasury yield widened significantly, indicating the market anticipates rate cuts.
• 📌 The current situation is reminiscent of 12 months prior, when the Fed also faced pressure to cut rates.
• 💰 While the speaker believes two rate cuts are the maximum for 2025, the weak data revisions could potentially lead to a third cut.
• 📊 Job revisions have been consistently negative, with a cynical view suggesting positive initial numbers are released for public attention, while revisions are overlooked.