The Federal Reserve may be slower to cut rates than many market participants expect, said Bridgewater Associates Co-Chief Investment Officer Karen Karniol-Tambour.
(Bloomberg) — The Federal Reserve may be slower to cut rates than many market participants expect, said Bridgewater Associates Co-Chief Investment Officer Karen Karniol-Tambour.
“When you look at what it takes to get fast rate declines, usually you need the economy collapsing pretty quickly,” she said in an interview for an upcoming episode of Bloomberg Wealth with David Rubenstein. “That’s very far from where we are today.”
Karniol-Tambour, 38, was named co-CIO earlier this year. She has worked at Bridgewater, which runs the world’s largest hedge fund, since graduating from Princeton University.
The Fed won’t be in a rush to raise or lower rates, Karniol-Tambour said.
“If I were in their shoes I would think the bar is pretty high to move either way,” she said. “I need to see how things play out, but I certainly am not excited about lots of rate cuts when inflation is a little stickier, or higher, than it should be.”
Read More: Fed’s Bostic Urges Caution to Avoid Inflicting Unnecessary Pain
While inflation has eased over the past year, the strength of consumer spending, which rose 0.6% in July, presents a fresh concern for policymakers seeking to ensure price pressures continue to dissipate. Many economists have already pushed out their recession calls, or in some cases scrapped them altogether.
Trading in swaps markets indicates that investors expect the overnight rate to fall to about 4.25% by the end of next year, down from the current 5.33%.
For the full interview with Karniol-Tambour, watch Bloomberg Wealth with David Rubenstein on Tuesday, Sept. 19 at 9 p.m. in New York.
–With assistance from Elizabeth Stanton.
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.