- Scott Minerd stated that the Federal Reserve may be forced to stop rate increases soon.
- Guggenheim’s CIO warned that it would plunge markets into crisis if it continues tightening.
- In an effort to control inflation, the US central bank raised interest rates aggressively in this year.
The Federal Reserve is likely to soon pivot away from aggressive interest rate hikes – and if it doesn’t make the shift, it could “break” financial markets, according to Guggenheim Partners’ Scott Minerd.
Minerd spoke to CNBC’s Thursday edition of “The View from the Top” on Thursday.Closing Bell: “Overtime”The Fed will probably have to pause its tightening campaign or reverse it soon.
He said, “All the signs are present.” “I cannot tell you what causes it, but the environment seems ripe.”
“And when Fed pivots, they are not going to preannounce, they are not going to ring any bells.”
According to Guggenheim’s global investment chief, the US central bank closely monitors inflation and employment data releases. Recent outlook. However, he believes financial stability and market function should also be on central bank’s radar.
Minerd repeated His warningsCracks have been seen across multiple asset classes due to the US central bank’s determination to use fast-paced increases to control red-hot inflation.
CNBC’s Darren said that “the environment is ripe” for a crisis. He added that if Fed keeps its hawkish communications up, I believe we’re quite likely have something happen in the financial markets.
In an attempt to control the escalating prices, the Fed raised interest rates by 75 basis point at three consecutive meetings. This has resulted in a rise in prices. Global economic pressure is increasing as central banks race to protect their currencies.Contrary to the US dollarThe soared by 17% in the past year.
Minerd pointed to the UK — where the Bank of England has started temporarily Stabilizing debt markets by buying government bonds — as one example of central bank tightening leading to breakages.
“We are witnessing cracks all around the place,” he stated. “Officially, one of the most significant was the UK incident where the Bank of England needed to enter the gilt markets.
Japan has It bought yen and decashed dollars to protect its currencyIn contrast to the dollar’s surging, the European Central Bank started raising rates despite the region’s economic vulnerability to Russia’s ongoing war in Ukraine.
Minerd stated, “We have this synchronized tightening of central banks around the globe including the Bank of Japan or the ECB.” “Global liquidity recedes rapidly.”
Minerd stated that the US central bank will be examining Friday’s nonfarm payrolls data. If the October jobs report shows that unemployment has risen faster than anticipated, the Fed may feel it is less able to increase rates aggressively.
Minerd stated that it was just a matter “of a pinprick” that could cause a Fed pause, or pivot. “75% have been less than the expectation for September, over the past 25 years.
Minerd stated that there will be increasing pressure on the Fed to reduce its aggressive rate rises, which will likely boost stocks and other more risky assets.
He stated that such an event would “probably catch investors off-guard” and could prompt a rally.
