SSGA's Hung on Fed Rate Cuts, Dollar Weakness

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00:00Many of the investors, let's say they're from Europe or from Japan or wherever they might be, China,

00:05they give you money, but they have their local currency and then it goes into dollars.

00:10Do you have many of your investors saying, I'm worried about the dollar's value or people don't care about that so much?

00:15Well, oftentimes our clients outside of the U.S. are either hedging or they're willing to take the exposure to the dollar.

00:25Coming into this year, our belief was that the dollar was somewhat overvalued, maybe 10%, 15%.

00:31So the weakness that we've seen in the dollar is actually a welcome.

00:35And, of course, makes the U.S. better as an exporter, reduces the deficit.

00:39I think with yesterday's news, it's likely to result in a slightly more weakening of the dollar just given the impact on the overall economy.

00:50So if you're managing $5 trillion, you obviously have some impact on the investment world and know what's going on.

00:55Suppose J-PAL called you up and said, I'm weighing whether I should increase or decrease interest rates or keep them the same.

01:03What would you tell them?

01:04Look, our view, we would like to see the Fed start rate cuts in June.

01:10And so we're calling for three rate cuts in the back half of this year.

01:13And it's primarily because of the weakening of the economy.

01:19And even if inflation were to go up, I don't think it'll go up as much as the worst-case scenario.

01:25Both are still lower.

01:27And the risk is that the Fed either doesn't have enough data or enough confidence or enough visibility.

01:35If they are too restrictive, it could further weaken the economy.