Sam Stovall, Chief Investment Strategist at CFRA Research, said he expects the Fed to cut interest rates twice this year.
Appearing on CNBC’s The Exchange program, Stovall evaluated market expectations, inflation outlook and signals from the retail sector.
Stovall noted that investors are focused on Fed Chair Jerome Powell’s message ahead of the Jackson Hole meeting, saying, “If they say they’re going to stick to the data, we still see a sticky inflation environment with the risk of a slowdown in employment.”
Stovall stated that annual core personal consumption expenditures inflation is projected to remain above 3% throughout the year, and that given this outlook, the Fed could cut interest rates once in September, skip October, and consider a second rate cut in December. According to the strategist, these steps will provide limited stimulus to the economy but won’t fuel inflation.
Stovall, noting that the housing sector is a critical indicator for the Fed, reminded that the construction confidence index recently fell to its lowest level since 2022. Noting that consumer confidence is also weak, the expert argued that the Fed’s decisions are targeted for the next 12-18 months, so it needs to take action today.
Stovall also said that customs duties continue to put pressure on economic growth and predicted that the U.S. economy could decline to 1.8-1.9 percent growth rates in the third and fourth quarters, but rise back to 2 percent in 2026.
*This is not investment advice.