David Jones, chief executive officer of DMJ Advisors and a former economist at the Federal Reserve, told CNBC’s “Power Lunch” that he expects the Fed to maintain interest rates at current levels until inflation is under control.
The Fed won’t cut rates “until they see the whites of the eyes in a slowdown in the economy” he said Tuesday.
“They’re not going to respond directly to either the subprime problems or the decline in the housing market,” Jones said. “…I think this is going to be the big difference between the (Ben) Bernanke Fed –- a somewhat more academic Fed -- and the (Alan) Greespan Fed. Greenspan was the master of picking out these moments when the economy might be weakening. He would probably be cutting rates sooner rather than later. I think the Bernanke Fed is going to worry about that inflation number until it comes down to their 1% to 2% comfort zone, and therefore they’re going to be cutting rates later rather than sooner.”