Cathie Wood Says Won't Be Surprised At Fed's Rate Cuts This Year: 'Bigger Risk Is Deflation…Also A Very Big Opportunity'

Zinger Key Points
  • Bad deflation is caused by demand destruction while good deflation creates demand, Cathie Wood said.
  • Fed Chair Jerome Powell reiterated his stance that rate cuts may by unlikely this year.
  • Wood also asserted her bull case for Tesla explaining why the EV maker could go for price cuts.

Cathie Wood of ARK Investment Management reportedly said she won’t be surprised if the Federal Reserve cuts rates this year and that she believes the bigger risk is deflation.

What Happened: “I would not be surprised to see the Fed cut rates this year. One of the other reasons that we are very focussed on this message that the bigger risk is deflation. It's also a very big opportunity. When we look at deflation, there's good deflation and there's bad deflation. Bad deflation is caused by demand destruction. Good deflation creates demand,” Wood told Bloomberg TV.

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After dialing down on the rate hike pace during the February policy where the Federal Reserve hiked rates by 25 basis points on expected lines, Chairman Jerome Powell did acknowledge that inflation has started declining. “We can now say for the first time that the disinflationary process has started. We can see that and we see it really in goods prices so far,” Powell had said during the post-policy conference.

He stated that the current outlook holds for slower growth, modest gains in unemployment and a slow fall in inflation. “If the economy performs broadly in line with those expectations, it will not be appropriate to cut rates this year,” Powell said according to a Reuters report.

On Tesla: Wood also asserted her bull case for Tesla Inc. TSLA, explaining why the EV maker could go for price cuts.

“You will notice that Tesla is cutting prices. Many people jump to the conclusion that they are having so much trouble now, there is so much more competition. No! Tesla can cut prices. Now, their supply chain issues are passing us because it is riding down a cost curve. The battery cost curve declined,” Wood said.

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Posted In: NewsEconomicsFederal ReserveGeneralARK Investment ManagementCathie WoodDeflationInflationJerome Powell
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