Kevin O’Leary says Americans should ‘get used to the idea’ that the Fed won’t offer reprieve to rates in 2024 — plus why he says you’d be ‘mistaken’ for thinking otherwise
Americans hoping for a reprieve on the interest rate front were left disappointed on Wednesday, when the Federal Reserve held its key rate at a 23-year high of 5.25% to 5.5%.
Inflation in the U.S. economy is still too “elevated” to justify a reduction in interest rates, the Fed said in a statement after a two-day meeting to decide the best course of action.
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“In recent months, there has been a lack of further progress toward the [Fed’s] 2% inflation objective,” the central bank noted — adding that the country’s “economic outlook is uncertain.”
This announcement — while disappointing for American families struggling to cope with the high cost of living — will have come as no surprise to those with a finger on the pulse of the U.S. economy.
As “Shark Tank” investor Kevin O’Leary told “Fox Business” on Wednesday morning: “They’re not going to cut rates. I don’t think they’re going to cut rates again this year. I think people should get used to the idea [that] they’ll stay where they are longer.”
Higher for longer
O’Leary’s “higher for longer” prediction, which is shared by many economists in the U.S., is based on the fact that the Fed has struggled to hit its inflation goals.
Consumer prices rose higher than expected in March, at a 3.5% annual increase, according to the latest Consumer Price Index data from the Bureau of Labor Statistics. That’s a considerable jump from February’s 3.2% rate and marks the highest annual gain in the past six months.
That was not the news the Fed — which is under immense public pressure to loosen monetary policy — wanted to deliver.
There are many factors keeping inflation “elevated,” from ongoing supply chain issues to international conflict and pent-up customer demand and economic stimulus from the COVID-19 pandemic. These are not easy issues to get under control.
“Inflation’s not going down anywhere near 2% for a bunch of reasons — and therefore they’re not going to cut rates,” said O’Leary. “Anybody that thinks they’re going to cut this year will be mistaken.”
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Make the most of it
While the average American has no immediate power over the price of groceries or the cost of rent, there are strategies you can follow to capitalize on the prevailing economic conditions.
O’Leary, for instance, said he is “investing under the premise that we’re going to be living with this rate cycle staying the same for the rest of the year.”
While the 69-year-old did not share any specific details of his investing strategy, there are some common moves that investors consider when interest rates and inflation are high.
Some turn to bonds and other fixed-income securities, which can offer attractive yields in an inflationary environment, while others investors focus on stocks with high dividend yields and long-term growth potential. This may also be a good time to consider investing in real estate and alternative investments, like gold, which acts as a hedge against inflation.
What you shouldn’t do, according to O’Leary, is place all your hope in the Fed.
“They keep pushing out their optimism month after month, but there’ll be no rate cuts this year,” he said on Fox Business. “I’m sorry, it’s just reality.”
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
