Scott Kleinman, Co-President of Apollo Global Management, cautions that the market should not become too complacent regarding the current trajectory of U.S. inflation and interest rates. Kleinman expressed concerns in an interview, asserting that despite the Federal Reserve's statements, inflation remains uncontrolled.
One potential inflationary catalyst, according to Kleinman, involves policies proposed by Donald Trump, such as tax cuts and import tariffs. These policies could exacerbate inflation, especially if retaliatory measures from global trade partners occur. Neel Kashkari, President of the Minneapolis Federal Reserve, highlighted a proposal from "Trump 2.0" to impose universal tariffs on imports, which could lead to prolonged inflation if trade tensions rise.
Susannah Streeter, Head of Money and Markets at Hargreaves Lansdown, suggested that the recent strength of the U.S. dollar reflects market anticipation of Trump's possible policy implementations. These include tax cuts, increased tariffs, and immigration restrictions—all factors likely to drive inflation, suggesting higher U.S. benchmark interest rates in the years ahead.
Beyond Trump's potential policies, Kleinman noted global trends, such as digital infrastructure development and decarbonization, as contributing to sustained inflationary pressure. This implies enduring higher interest rate environments over time.
Since September, the Federal Reserve has cut interest rates twice, with a 50-basis-point reduction in September and another 25-basis-point cut in November. Kleinman argues that further rate cuts could exacerbate inflation control challenges, echoing Apollo CEO Marc Rowan's view that there is no need for further rate reductions to stimulate the economy.
A significant economic data point, the U.S. October CPI report, is soon to be released and could influence the Federal Reserve's future policy direction.
