00:00 Speaker A
How much will Rob cut in 2026? What is your basic situation?
00:03 Rob
Yes, we think there might be a few coming, but they won’t be early and they won’t be quick. I think when we think about these several rate cuts, it’s really because there’s a lot of dispersion in the potential outcomes here, right? If, uh, if we see some surge in the economy, the Fed may not need to take any action, right? Of course, we have some good news when it comes to consumer stimulus around tax time, as we move into the summer and especially the World Cup, spending is going to increase, right? But if we get more uncertainty from the government shutdown and other issues, right? That could take us to the other side, where the Fed does need to do more to support the economy as we go forward.
00:59 Speaker A
Well, Thomas, we have two cuts on the board. Two knives. This is the basic situation. Thomas, is this your calling?
01:08 thomas
Well, I think it’s actually more or less a mirror image, because I think you could make the argument that they should continue to cut spending in the short term and then let the economy develop naturally in the second half of the year and beyond. Uh, I think that, you know, the slack that has stopped accumulating in the labor market, you know, tells them that they don’t necessarily need to act with a great sense of urgency to significantly lower rates and, uh, you know, keep cutting rates here and there. Uh, but I think when you look at the recruitment being very narrow, it’s still very focused on leisure and hospitality and private healthcare jobs. I think what it tells you is that you can’t create a lot of jobs without a lot of small business creation, and we’re generally used to labor market expansion cycles. That probably means interest rates are playing a role, right? You know, the financial health is very, very good for large companies that borrow money in the syndicated market. But when you consider that small businesses will still try to get bank loans at revolving rates, they are exposed to interest rate risk. I think a few cuts, one or two, maybe one in March and one in June, will really start to get things going. And then that’s going to combine with the fiscal tailwinds to give us some really good growth in the second half. If productivity continues, we may even be able to achieve this without much risk of inflation.
