The economic signs that point to an 'official' US recession
July's Producer Price Index (PPI) rose 0.1% month-over-month and 2.2% year-over-year, coming in below economists' forecasts. University of Akron’s endowment committee chairman Dennis Gartman joins Morning Brief to discuss the print and what it signals for the Federal Reserve's interest rate decision in September. "Early in the year, I found it laughable that there were there was consensus that we'd have five to six cuts in the overnight Fed funds rate by the year end. I maintained right from the start that at most we'd have one, maybe two, and I really didn't think that we'd have a cut until after the November election at the November FOMC meeting," the former Gartman Letter editor and publisher explains to Yahoo Finance. "But now it seems quite possible, in fact, it's highly probable that we'll get a 25, maybe 50-basis-point cut in the overnight Fed funds rate at the September meeting," Gartman says. He notes that when the Fed changes its policy direction, it does so over a longer than expected period of time. Thus, when the Fed starts easing rates in September, it is likely to ease to "2.75% or 3% over the course of the next two or three years." "Given the fact that the leading economic indicators peaked 18 to 24 months ago, that money supply has been decreasing over the course of the past year or two, that consumer credit cards are extremely expanded, that we probably have seen the highs as far as consumer demand is concerned, I think, in essence, we will see that we are in or soon shall be in an official recession. And that will be enough to take the unemployment rate above 5%, and that will be enough to take the Fed funds rate to 2.5%. But that will take a year or two. It'll be a long time in coming," he adds. For more expert insight and the latest market action, click here to watch this full episode of Morning Brief. This post was written by Melanie Riehl
