Scott Kleinman, Co President of Apollo Global Management, warns the market not to be overly satisfied with the current inflation and interest rate trajectory in the United States.
A week after Donald Trump won the US presidential election, Kleinman delivered the aforementioned speech. He said in an interview, "The Federal Reserve can say whatever it wants, but in fact, inflation is not under control. You just need to open your eyes and see (inflation is not what the Federal Reserve says)
Inflation 'catalyst'
The first factor is that, considering Trump's idea of cutting taxes and imposing a series of import tariffs, many people including Kleinman have warned that these policies may become a catalyst for exacerbating inflation.
For example, Neel Kashkari, the President of the Minneapolis Federal Reserve, pointed out that one of the core economic proposals of "Trump 2.0" is to impose universal tariffs on all imported goods from all countries. If it triggers a counterattack from global trading partners and implements retaliatory measures against the United States, it may exacerbate long-term inflation.
Susannah Streeter, the head of funds and markets at Hargreaves Lansdown, an investment platform, also believes that the recent strengthening of the US dollar reflects market expectations for potential policies that Trump may implement, including tax cuts, increased tariffs, and restrictions on immigration, all of which are inflationary factors that could mean higher US benchmark interest rates in the coming years.
In addition to the potential impact of Trump's policies, Kleinman also pointed out that due to global trends such as digital infrastructure construction and decarbonization, inflationary pressures have already formed, "so we will have to endure a higher interest rate environment for a longer period of time
Since September this year, the Federal Reserve has cut interest rates twice in a row, with a one-time reduction of 50 basis points at the September meeting and another 25 basis points at the latest November meeting. Kleinman believes that "the more the Federal Reserve cuts interest rates, the harder it is to control inflation
This echoes the remarks of Apollo CEO Marc Rowan, who stated last month that he believes the Federal Reserve has no reason to continue cutting interest rates to stimulate the economy.
The key economic data after the election, the US October CPI report, will be released on Wednesday evening Beijing time, which may have a critical impact on the future policy path of the Federal Reserve.