The Institute for Supply Management’s manufacturing Purchasing Managers’ Index (PMI) fell to 48.7 in May from 49.2 in April, falling below analyst expectations. Saxo Chief Global Equity Strategist Peter Garnry joins Catalysts to explain what this print could signal for the Federal Reserve’s next interest rate decision.
"We are facing a world where China is pushing on an export string, and that’s really pressuring manufacturing both in Europe and the US," Garnry explains. He believes that the harder China pushes on its export policy, the harder the US and Europe will push back. "In the short run, it could cause lower goods inflation in the global economy. But longer run, the goods inflation will be higher because it will force the US and Europe to be more protectionist [in its] trade policies and put up tariffs around their economies," he adds.
As Wall Street eyes the Fed’s next rate move, Garnry says the Fed is grappling with a "two-lane economy," where one part is sensitive to interest rates while the other part remains resilient. Garnry predicts a rate cut later in the year and adds that the US needs to get past the presidential election to see how the market pivots.
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