Earlier this week, investor Kevin O'Leary warned that Federal Reserve Chair Jerome Powell may hold firm on interest rates despite widespread market expectations for cuts, citing strong economic growth, rising asset prices and the disruptive impact of tariffs and artificial intelligence.
O'Leary: Fed May Surprise Markets
Speaking about the Federal Reserve's policy dilemma on Monday with Fox News, O'Leary described Powell's position as "a very difficult situation."
He noted that Powell, nearing the end of his tenure, has little political incentive to cut rates simply to appease investors or politicians. Powell's tenure as Federal Reserve chair is set to conclude in May 2026.
“He’s not going to do anything he doesn’t think the right thing,” said O’Leary, adding, ” The problem is with the exception of California, which is an economic disaster.”
See Also: Kevin O’Leary Says Business School Teaches You Nothing Until Reality Hits -- Reveals How He Learned The Hard Way And Now Spots Winners Quickly
“The rest of the country is on fire, literally, it's doing incredibly well," he stated. "If you drop the Fed rates, you're going to spike these asset classes, including the risky ones, even higher. For what purpose? What are we trying to fix right now?”
The investor popularly known as "Mr Wonderful" suggested that, at most, the Fed might deliver a modest 25-basis-point cut, but he sees a real possibility that Powell will refuse to move.
Subscribe to the Benzinga Tech Trends newsletter to get all the latest tech developments delivered to your inbox.
Powell's Jackson Hole Test
Markets are watching closely ahead of Powell's speech at the Jackson Hole Economic Policy Symposium on Friday.
Analysts estimate an 84% chance of a September rate cut, according to Gary Black of The Future Fund. Tom Lee of FundStrat added he hopes for a "conciliatory tone" from Powell.
Yet hotter-than-expected inflation reports and disappointing July payroll growth of just 73,000 jobs complicate the case for easing. While GDP surged at a 3% annualized pace in the second quarter, tariffs and rising prices remain key risks.
AI Productivity Vs Union Pushback
O'Leary also addressed the growing clash between artificial intelligence adoption and labor unions seeking restrictions. The AFL-CIO and other labor groups are working with state lawmakers on AI regulations, from driverless cars to workplace monitoring.
"They're not going to win that one," O'Leary said, arguing AI is boosting productivity across all 11 sectors of the economy. "Even in financial services like insurance, we're killing it. It's unbelievable what's happening."
He compared union resistance to buggy makers protesting the automobile, saying AI disruption is irreversible and a major driver of current market strength.
"It’s one of the reasons the market’s so hot. The market sees productivity and margin enhancement everywhere with AI," the investor said.
Read Next:
- Jamie Dimon's Childhood Kitchen Table Was Chaotic, Filled With Loud Debates -- But This Teenage Lesson Shaped One Of America's Most Powerful Bankers
Photo Courtesy: Kathy Hutchins on Shutterstock.com
Disclaimer: This content was partially produced with the help of Benzinga Neuro and was reviewed and published by Benzinga editors.
