Ask Dr. Vince Malanga of LaSalle Economics how many interest rate cuts we’ll see the Federal Reserve announce in 2024, and he says one or two at the minimum.
This is one of his insights recently shared on AgriTalk Radio as he gave his thoughts on the U.S. economy and the Federal Reserve’s maneuvers.
On interest rates, his opinion is we should have already seen a cut.
“They should have taken a victory lap. We got a sharp decline in inflation. They should have seized on that,” Malanga says. “They would have assuaged the bond market and made it a little bit easier to sell this debt. We know the government has a prolific amount of debt they have to sell. They would have stabilized the commercial real estate sector without any change in the overall economy.”
Malanga reflects on the current short-term perspective of interest rates being restricted.
“They’re running somewhere between two and three percentage points over the inflation rate and so they’re moderately restricted,” he adds.
As such, there’s still economic improvements that demand attention. He points to the residential and commercial real estate markets as being pointedly troubled right now.
“The housing market is a mess. Housing is unaffordable, not only because of mortgage rates but also because of the cost of utilities and the cost of insurance–the cost of all that overhead,” he says. “The commercial real estate sector is a mess. There’s about a trillion dollars of commercial real estate debt that has to be rolled over and the values of commercial real estate have gone down.”
The weight of government debt on the economy is another focus for Malanga.
“There is not a day that goes by that the government doesn’t have to issue more debt. The government is the strongest sector of the economy, but the government is growing at the expense of the private sector,” he says. “Government spending, which has historically been running between 18% and 20% of GDP, is now running between 23% and 25% of GDP.”
He adds, “when you’re shoveling that much money into the economy, it’s like throwing a bunch of spaghetti at the wall. Some of it will stick.”
In addition to the economic concerns, Malanga says there’s possibility to have three wars simultaneously occurring.
“There’s no room for catastrophe,” he says.
As for what’s next, Malanga hopes the first steps are reducing government spending, and not increasing taxes, while being paired with economic stimulation.
“Government spending has to be brought under control. The most direct route by which the deficit has gotten to gain some control over is by stimulating the economy, stimulating the private sector of the economy. Deregulate the economy rather than over regulate the economy,” he says.
Malanga also shares insights on the Chinese economy, which you can hear in this full clip from AgriTalk.
