Fed pause puts US economy in peril: deVere CEO
The Federal Reserve should have cut rates today (Wednesday), and not doing so puts the US economy at risk, warns the CEO of financial advisory giant deVere Group.
The warning from Nigel Green comes as the US central bank leaves the federal funds rate target range unchanged at 3.50% to 3.75% at its January policy meeting, extending a pause after three cuts in 2025, even as signs of economic deceleration intensify.
Fresh data underline growing fragility in the US economy. Consumer confidence dropped in January to 84.5, the lowest level since 2014, with the expectations index at 65.1, a level historically associated with recession risk.
Hiring momentum has slowed sharply, with employers adding only about 50,000 jobs in December and just over half a million jobs across 2025, far below the pace of the previous year.
Inflation pressures continue to ease, with headline CPI ending 2025 around 2.7% year on year and core PCE near 3%, trending lower.
“Keeping rates on hold today is a policy error that risks tightening financial conditions by default at the very moment the economy is losing momentum,” says Nigel Green.
“A modest cut would have been prudent risk management, not a retreat from inflation discipline.”
He points first to the labor market, which he describes as the clearest early warning signal in the current cycle.
“Unemployment remains low at 4.4%, but the headline masks a sharp slowdown in hiring.
“The US added only about 50,000 jobs in December, far below levels needed to absorb population growth. This is a classic low-hire environment that can flip into job losses with little warning.”
He argues that central banks tend to react too late to labour market turning points.
“History teaches us that monetary policy works with long lags. Waiting for payrolls to collapse before acting means easing arrives after the damage has already compounded.”
Consumer sentiment is another warning signal. US consumer confidence has dropped to its lowest level since 2014, with households citing anxiety about inflation, jobs, politics, and trade.
“Confidence drives spending, credit demand, and housing turnover. When sentiment collapses this sharply, real economic activity usually follows,” notes the deVere CEO.
He adds that inflation dynamics now give policymakers room to act.
“Headline inflation ended 2025 in the high-2% range and core inflation is near 3%. Inflation remains elevated, but it’s no longer accelerating.
“The trajectory matters more than the level, and the trajectory is down.
He continues: “Policy credibility is often misinterpreted as toughness. Credibility is accuracy. Holding policy too tight as growth cools risks turning restraint into overkill.”
Current rates are already close to estimates of neutral. The policy rate is in the 3.5% to 3.75% range, which is not far from neutral according to many models.
“Maintaining a restrictive stance in a cooling economy is a recipe for an avoidable downturn,” he says.
He also highlights financial conditions as an underappreciated risk.
“Markets are pricing fewer than two rate cuts this year. If inflation continues to drift lower while policy stays fixed, real rates rise automatically. That is passive tightening without a single hike,” says Nigel Green.
“A small cut today would prevent policy from becoming restrictive by inertia.”
The balance of risks, he argues, has shifted.
“When inflation flares, the central bank can respond quickly. When hiring freezes spread and confidence collapses, repairing the labour market takes far longer and costs far more,” he explains.
“The employment side of the mandate is now closer to a turning point than inflation.”
He rejects the argument that economic resilience justifies inaction.
“Resilience is backward-looking. Central banking must be forward-looking. Waiting for undeniable weakness is how policymakers end up cutting aggressively in recessions rather than gently in expansions.
He concludes: “A pause often looks safe in the meeting room and dangerous in hindsight.
“Failing to cut can be expected to increase the odds the Fed is forced into deeper, faster easing later, after growth and employment have already deteriorated further.”