Lede

Former Pimco chief economist Paul McCulley predicts that mounting economic pressures will convince the Federal Reserve to stop hiking rates next month.

Summary

• Paul McCulley believes that the Fed will stop hiking rates next month, unless there is a surprise jump in inflation.
• The former Pimco chief economist sees a disconnect between the economic community and the marketplace, and thinks that the market will eventually price in his central bank pause call.
• According to McCulley, the Fed will look at the data coming in, as well as the stress in the banking system, and recognize that they've already done 500 basis points worth of tightening.
• This call is at odds with the recent CME Group estimate, which shows a 73% chance of a quarter point interest rate hike in May.
• McCulley believes that a pivot could come even without a recession, and when the short end of the yield curve comes down and the yield curve re-slopes, Main Street stocks will catch a bid, instead of just a few mega growth stocks.