The White House wants the Fed to cut rates. Wall Street says it’s a terrible idea.

Top White House brass, including President Donald Trump and Vice President Mike Pence, have recently called for the Fed to cut interest rates.
On Friday, Pence argued the Fed should cut rates because inflation is low.
Earlier this week, at the Milken Institute Global Conference, some of the biggest names on Wall Street pushed back against the need for Fed rate cuts, saying inflation will pick up soon.
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The US economy is on fire.

First-quarter GDP, out last week, grew at an annualized rate of 3.2%. And the good news kept coming on Friday, with the the Labor Department announcing US nonfarm payrolls added 263,000 job in April, pushing the unemployment rate down to 3.6%, its lowest since December 1969.

Yet the White House says things are just getting started — so long as the Fed cuts interest rates.

Following Friday’s jobs report, Vice President Mike Pence told CNBC’s Eamon Javers that the Fed should consider removing employment from its dual mandate and cutting interest rates.

"The fact that the Fed looks at full employment and monetary policy and inflation," Pence said.

He continued: "And instead, by just looking at inflation, you would make clear there’s no inflation happening here, the economy is roaring. This is exactly the time, not only to not raise interest rates, but we ought to consider cutting them."

Pence’s comments echo similar calls made by top White House brass, including President Donald Trump and Larry Kudlow, his chief economic adviser.

Yet Wall Street doesn’t see it that way.

Earlier this week, at the 2019 Milken Institute Global Conference in Beverly Hills, some of the world’s greatest investors and economists pushed back against the need for rate cuts.

"The data is so overwhelmingly positive in the US that it would be very hard to cut rates at this point," said Ronald O’Hanley, the president and CEO of State Street. "I personally don’t believe that the Fed will do it."

And his colleague Scott Minerd, the global chief investment officer for Guggenheim Investments, agreed.

"I think the idea that inflation is dead is more rhetoric than anything," he said. "At some point, we’ll start to see inflation pick up," and the Fed will have to "act to increase rates again."

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