Fundstrat’s Tom Lee criticizes Jerome Powell’s ‘data-dependent’ approach: ‘That’s why we missed the inflation turn’

Managing Partner of Fundstrat Global Advisors Tom Lee Criticizing Federal Reserve System chair Jerome Powell Lee said the Fed’s decision-making ability was being undermined by an over-reliance on data.

what happenedLee expressed concern that the Fed is relying too heavily on data to make decisions, suggesting that this approach could lead to delayed action on inflation and put the Fed on course to repeat similar mistakes, he suggested in an interview with CNBC’s Squawk Box on Thursday.

“That’s why we missed the inflation turnaround and now I think we’re missing the soft landing turnaround,” Lee said.

Lee noted that the Fed’s data-driven strategy is not inherently flawed, but it can slow the central bank’s response to changes in the economy. He stressed the need for the Fed to become less reliant on data and develop a more proactive approach to decision-making.

“The chances of a soft landing are increasing, but I think the key is for the Fed to move away from being so data-dependent,” Lee said.

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Why is this important?Lee’s criticism comes at a critical time when the Federal Reserve is signaling a possible shift in monetary policy. Several Federal Reserve officials, including the president of the Boston Fed, have recently said Suzanne Collins President of the Federal Reserve Bank of Philadelphia Patrick Harkersuggested the central bank could start easing interest rates as early as September.

Collins expressed confidence in the U.S. economy, noting that inflation has receded and the labor market has cooled but no major concerns have arisen. With inflation on track to reach the Fed’s 2% target, he suggested it may be time to adjust the benchmark federal funds rate, currently set at 5.5% from 5.25%, a 23-year high.

Additionally, investors will be keenly watching Fed Chairman Powell’s speech at the Jackson Hole Symposium, scheduled for 10 a.m. ET on Friday.

Historically, Powell’s speeches have had a big impact on market sentiment. For example, he suggested that policy would need to be tightened for “some time” in 2022 to tame inflation, causing Treasury yields to spike and stock prices to fall.

moreover, Mohamed El-ErianChief Economic Advisor AllianzHe highlighted the Fed’s shift in policy focus to employment, signaling that a rate cut in September is all but certain. El-Erian noted that the shift is due to growing confidence that the inflation target is now within reach, which is due to ongoing de-inflationary factors.

Minutes from the Federal Open Market Committee’s July meeting also showed policymakers leaning toward cutting interest rates for the first time in more than four years when they meet in September.

The minutes revealed that several participants cited reasonable justification for lowering the target range by 25 basis points, based on recent developments in inflation and rising unemployment.

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This story was produced by Benzinga Neuro. Kaustubh Bagalkote