Speaking to ET Now, Ferris said the Fed had made a “very bad move” by lowering rates at this stage. He explained that while the Fed is focusing on the labour market, markets remain more worried about inflation. “The bond market is telling us they are not impressed,” Ferris noted, pointing out that long-term yields barely moved after the cut.
According to him, inflation has remained stubborn, with seven straight months of numbers either rising or staying flat. “The inflation trend is going up, not down. A cut in interest rates is not going to discourage it, particularly asset inflation,” he said.
Ferris also questioned the effectiveness of rate cuts in creating jobs. He argued that even if rates were cut sharply, the impact on employment would take at least nine months to show. Instead, lower borrowing costs might push companies to invest more in artificial intelligence—an area that does little to generate jobs. “Cutting rates and keeping your fingers crossed that this will affect employment is very optimistic,” he added.
On future policy, Ferris dismissed projections of two more cuts later this year, saying the Fed’s own “dot plot” showed half of its members favouring no change. “Between now and the first quarter, I expect no movement in interest rates,” he said.
Ferris also criticised the US administration’s tariff policies, calling them “a complete incoherent mess.” He noted the uncertainty around US trade relations with China, India, and the European Union, saying it was discouraging investment. “If the idea was to use tariffs to boost employment, they are not even doing that consistently,” he remarked.In conclusion, Ferris warned that focusing narrowly on labour markets while ignoring inflation risks could backfire. For investors, the muted reaction of the S&P and bond markets suggests scepticism about the Fed’s strategy.
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