The Federal Reserve’s recent 25 basis point cut hasn’t fully alleviated market concerns about inflation heading into 2025. Serpa Pinto Advisory Founder Jon Hilsenrath joins Market Domination Overtime to share his economic outlook. Hilsenrath argues that the interest rate cut was "the wrong move," suggesting that the central bank "waited one meeting too many to pause the rate cut cycle." He cites three key factors: robust economic growth, decelerating inflation improvement, and elevated inflation risks for 2025 — adding that future rate cuts will require "real, tangible" improvement on inflation. While Hilsenrath suggests a potential rate cut in March 2025, he maintains there’s zero possibility for cuts in January or February. However, he highlights a significant concern regarding the Fed’s balance sheet: "What really really matters isn’t the size of the balance sheet, it’s the construction of the balance sheet. It’s what… they hold in mortgage securities and, most importantly, what… they hold in long-term Treasury securities. They’ve wound that down, but they still have more than $6 trillion of… long-term Treasury and mortgage securities on their balance sheet," he explains.
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