Fed will not raise rates this year, says EY-Parthenon's Greg Daco

Summary

EY-Parthenon Chief Economist Greg Daco argues the Fed will not raise rates because inflation stems from supply pressures like energy and AI, not excess demand. He also highlights an ongoing income squeeze that caps consumer spending. CNBC's Matt Peterson notes the White House's softening tone toward the Fed under new Chair Kevin Warsh.

• Greg Daco expects the Fed to hold interest rates steady, not hike, as supply-side inflation is beyond monetary policy's effective reach.
• Inflation is driven by higher energy prices and AI-induced demand for computers/electronics, not broad demand.
• Real after-tax incomes are stagnating, with inflation-adjusted wages in contraction, putting a cap on consumer spending growth.
• The economy remains forward-moving but fragile, with the income squeeze expected to persist into the second half of the year.
• Matt Peterson highlights that the administration's pressure on the Fed has eased now that Kevin Warsh is chair.