In a Monday-morning interview on CNBC, Evercore founder Roger Altman lauded the Federal Reserve for creating "nearly perfect" economic conditions, highlighting the continued strength in equities, corporate profits, and employment. The only obstacle preventing a full declaration of a soft landing, he noted, is inflation, which remains slightly above the Fed's 2% target.
"If the landing is complete, and the Fed hits its target, I believe Powell deserves an 'A,'" Altman remarked, referencing the Fed Chairman. "Achieving that would be nothing short of miraculous." He expressed confidence that the Fed isn't far from reaching that milestone.
While there are concerns that future rate cuts could reignite inflation, Altman expects a potential slowdown in inflation when the new personal consumption expenditure data is released later this week.
Altman also discussed the Fed's recent decision to implement a larger-than-expected rate cut.
"My sense is that the Fed saw inflation on a steady downward trend and was more certain about that than about the labor markets, which carried a bit more uncertainty," Altman explained. "So they made a more aggressive move to stabilize labor markets, opting for a 50 basis point cut."
Altman’s current praise for the Fed marks a shift in his outlook. Last year, he was one of the voices cautioning that rising interest rates could plunge the U.S. into recession. Now, he’s commending the fact that unemployment has remained at 4.2% and pointing out that the S&P 500 is on track for its best annual returns since 1960.
Altman’s view aligns with a growing number of economists who have reevaluated their stance on the Fed's policies.
In August, former Treasury Secretary Larry Summers acknowledged that the Fed had successfully averted his worst-case recession fears. Summers conceded that the central bank had redeemed itself after initially lagging in its response to the inflationary pressures triggered by the pandemic.
