Drew Matus, chief market strategist at MetLife Investment Management, has issued a strong call for Federal Reserve Chair Jerome Powell to disentangle the Fed’s actions from the stock market’s performance. Matus contends that the Fed’s current strategy is flawed as it appears to be excessively influenced by the stock market’s ups and downs. He believes that the Fed’s decisions should not be dictated by factors like an unemployment rate exceeding 4% or the easing of financial conditions.
Matus argues that the Fed should focus on winning the war against inflation and managing the rising unemployment rate, which will naturally suppress inflation. He advocates for a clear message from Powell, emphasizing that the Fed is committed to these objectives. Specifically, he believes Powell needs to provide a convincing explanation for how a few rate cuts would effectively address inflation and dispel the market expectation of substantial rate cuts in the coming months.
Matus’s remarks come ahead of Powell’s anticipated appearance at the Jackson Hole symposium, where he is expected to discuss the Fed’s ongoing battle against inflation. Market speculation is rife with expectations of a rate cut, but renowned market analyst Peter Boockvar believes that Powell will only acknowledge a potential September rate cut based on employment data, not the inflation rate.
Matus’s call for a more independent Fed policy is a significant development, especially as the market awaits Powell’s speech at the Jackson Hole symposium. It remains to be seen whether Powell will address these concerns and outline a clearer path forward for the Fed’s monetary policy.
