Daniel Lacalle argues the Fed is unlikely to hike next week, but also says the Fed should stay on hold and keep shrinking its balance sheet because tighter policy could choke credit and liquidity. He thinks the bigger macro problem is not a U.S. recession but stagnation across developed economies, while global liquidity is still enough to keep U.S. equities supported and pressure some other assets. He is bullish gold and silver on dips over the medium term, bearish oil, and skeptical that dedollarization has become a true substitute-based monetary shift.
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This conversation centers on Lacalle’s view that the U.S. is not heading into recession, even if headline inflation remains sticky enough to keep the Fed under scrutiny. His core macro thesis is that the real risk is stagnation in the developed world, not a U.S. downturn: he explicitly says he is “not worried about a US recession in any shape or form,” but is worried about the UK, Canada, Japan, Germany, France, Italy, and the broader developed-economy bloc. In his framing, the Fed is being forced to balance still-solid employment against inflation that is partly energy-driven and likely to ease if oil, commodities, and freight keep correcting. On policy, he argues the latest CPI print was broadly in line with expectations and even better on core than he expected. …
Near term, the setup is a liquidity contest: the Fed meeting and large IPOs are the key events, while gold, silver, and oil remain vulnerable to positioning and flow. A surprise hike or stronger hawkish tone would be the main tactical risk.
Over the next few months, the base case is continued U.S. equity resilience and eventual recovery in gold/silver if global liquidity stays elevated and the IPO drain passes. The view weakens if inflation re-accelerates enough to keep the Fed tight or if developed-world stagnation deepens into a broader growth scare.
The lasting thesis is that global markets still run on dollar-centric liquidity and legal infrastructure, not on a true alternative reserve system. Central-bank gold buying matters, but it looks like diversification inside the existing regime rather than a replacement of it.
The U.S. is not in recession; the bigger concern is stagnation across developed economies.
He explicitly rejects a U.S. recession call and lists several developed economies as stagnant or near recession.
The Fed should not hike because higher rates could trigger a credit shutdown by making banks prefer Treasuries over lending.
He argues even a 25 bp hike could reduce lending and liquidity, especially for small businesses and households.
The Fed is more likely to stay prudent and focus on core inflation and a still-solid labor market than to make a political statement.
He expects the new chair to be careful and not provoke either political side.
Did the CPI print stay within expectations for you, Daniel?
Daniel says the core CPI figure was better than he expected — he did not expect core CPI to be down month-on-month. He notes 65% of the CPI rise came from energy, and that if energy hadn't been so high, CPI could have been 1.7%. With oil and commodity prices correcting, many investors expect a significant reduction in the June CPI print.
Is strong employment and inflation enough for the Fed to stay neutral?
Daniel argues the Fed might cling to strong job creation, but labor force participation and the unemployment rate are still below the 2018-2019 average. He says if he were Kevin Warsh, he'd look at credit growth, money supply, and money velocity — all of which signal no hiking, because money supply growth has stalled, money velocity is weaker, and credit growth isn't strengthening. Hiking could cause a credit shutdown and liquidity reduction for SMEs without moving oil prices or geopolitical risk premiums.
Should the Fed hike rates next week or is that a policy mistake?
Daniel says he would stay put — better to hold rates than make a policy mistake that could generate a negative domino effect for SMEs and families. Rate hikes won't change oil prices or geopolitical risk premiums.
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