(Bloomberg) - Bob Prince, the co-chief investment officer of Bridgewater Associates, said the Federal Reserve is “off track” with its plans to cut interest rates.
Speaking to the Financial Times, Prince said there’s no reason to move out of cash into longer-term bonds, saying the risk premium was too small. The only reason to cut rates at current levels of economic growth and persistent inflation is if there was a big productivity boost that would allow the US to have non-inflationary growth, he told the newspaper.
“So far, this year is not transpiring the way that the Fed — or interest rate markets — have described,” he told the FT. “I think it is clear the Fed is off-track now. The question is how far off track.”
The comments add to views that expectations for monetary easing this year have moved ahead too quickly. Federal Reserve Bank of Atlanta President Raphael Bostic reiterated on Tuesday his expectation for one interest-rate cut this year, but added he’s open to changing his view should the economic picture change.
Views are split across the market. The Fed’s March “dot plot” affirmed officials’ expectations of three quarter-point cuts this year. Even so, investors have started to question that outlook given the robust US data and have priced in just 65 basis points of easing.
The US inflation report today could offer direction on how the Fed may proceed. Economists forecast that consumer prices rose 0.3% in March on a monthly basis, both overall and excluding food and energy costs. While that would mark a step down from the previous two months, it may not be enough for officials looking for even lower readings.
By Greg Ritchie
