(Bloomberg) -- There’s a growing chance the Federal Reserve could stand pat on interest rates until year-end rather than enter the fray of an increasingly heated US election race, according to Mercer LLC’s chief investment officer.
“You would be tempted if you were a Fed governor to say ‘let’s stay as we are, stay on hold until after the presidential election’,” Hooman Kaveh said in an interview with Bloomberg Television on Tuesday in Melbourne.
The asset manager still expects two US rate cuts before the end of the year, Kaveh said. However, with President Joe Biden quitting the election race and Republican nominee Donald Trump likely to take on new adversary Kamala Harris, there’s potential for that scenario to change, he said.
“Economic growth is solid, employment is fine though trending a little bit off, and inflation is behaving itself,” Kaveh said. “As long as things look okay, which they seem to do, and the Fed’s current policy is not putting undue pressure on any particular domestic or international factors, then I think they’re probably comfortable to sit tight.”
In an interview with Bloomberg last month, Trump said that if reelected he would allow Jerome Powell to serve out his term as Fed chair, which runs through May 2026.
Mercer, part of consultancy and insurer Marsh McLennan, and with $492 billion under management globally, is gathering clients in Melbourne this week for its Pacific Global Investment Forum, where questions about political change will be among the top investment concerns, Kaveh said.
“The Fed will want to minimize any interference in what is going to be obviously a contentious run into the election,” he said.
--With assistance from Paul Allen.
(Company updates AUM figure in 6th paragraph)
©2024 Bloomberg L.P.
