The latest Consumer Price Index (CPI) data reveals that inflation is cooling, drawing ever nearer to the Federal Reserve's target goal of 2%. Will this give the Fed enough confidence to begin cutting interest rates? Some on Wall Street believe that the Fed should have cut rates earlier and have now opened the US economy up for the potential of a recession.
NYU Stern School of Business professor emeritus and Hudson Bay capital senior advisor Nouriel Roubini joins Catalysts to give insight into July's CPI print and what it means for the Fed and the broader economy.
Roubini, often referred to as "Dr. Doom" for his dour forecasts, believes a recession is possible: "The risk of recession is probably rising. There has been some softness in manufacturing PMI [Purchasing Managers' Index]. Some parts of the consumer sector, the labor market is softening, but it's not contracting. So my baseline would be still for a soft landing overall."
Roubini also characterizes July's employment data as "a bit of a fluke":
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"There is some softening in the labor market, but the increasing unemployment rate is driven by an increase in the labor supply, not a contraction in labor demand. So, I think the economy is cooling off. Some parts of the economy are softer, but unless I would say the August employment report is going to be really poor and I don't expect it to be really poor, the Fed's going to start cutting rates in September..."
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This post was written by Nicholas Jacobino