John Ryding on Fed Rate Cuts, Inflation, and Labor Market Data

Economic Data and Fed Surveys

• 📈 The Philadelphia Fed manufacturing index is highlighted as a key indicator, with the prices paid index rising but the six-month business outlook showing improvement.
• 📊 A clever aggregation of five Fed surveys reveals that prices are higher while employment is flat, based on September data going back to 2000.
• 🔍 The blue line tracking inflation correlates well with these aggregated surveys, while the orange line for employment is volatile but generally moves in the right direction.

Fed's Dual Mandate Concerns

• ⚠️ John Ryding disagrees with the notion that the Fed's focus has shifted to the labor market, arguing that inflation is not trending back to the 2% target.
• 🎯 The unemployment rate is only slightly above what the Fed considers full employment, making the argument for a labor market focus seem contorted.
• 📉 Ryding criticizes the reliance on these surveys, comparing them to a "one-eyed man with cataracts" and suggesting they are often ignored in favor of real data.

Inflationary Pressures and Rate Cut Doubts

• 🗣️ There's concern about wishful thinking regarding inflation, referencing past instances like the "inflation is transitory" narrative.
• 📉 The market anticipates rate cuts, but Ryding questions the catalyst for such easing, especially with inflation moving in the wrong direction.
• 📊 The University of Michigan survey shows 5-year expected inflation at 3.7%, nearly double the Fed's target, contradicting claims of anchored inflation expectations.

Labor Market, AI, and Monetary Policy

• ❓ Ryding questions the logic of cutting rates to address labor market weakness, noting the Fed already did this last year.
• 🤖 Studies suggest AI is substituting for entry-level jobs, holding down hiring not due to demand shortage, but due to technological substitution.
• 🧠 Inflation is fundamentally a monetary phenomenon, not solely a labor market one, as emphasized by Milton Friedman.
• 📉 Interest rate cuts lower the cost of capital and incentivize investment, but AI's deflationary potential is also a factor to consider.

Expert Economic Analysis

• 🧐 Rick Santelli and John Ryding are noted for their consistent stance on the Fed ignoring inflation and questioning labor market signals.
• 💰 The market's optimism for rate cuts is attributed to the general desire for lower rates, but a clear catalyst is missing.
• 💡 Ryding's analysis is praised for its economic soundness, with a strong agreement on the assessment of inflation and labor market data.