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A Slow-Moving Fed Faces Sticky Inflation and Slowing Growth

October 16, 2026

Video Transcript

JD Durkin: Let’s bring in Drew Matus. Drew, come on in here, my man. Chief market strategist at MetLife Investment Management. Thank you for being here today.

Drew Matus: Thanks for having me.

JD Durkin: And nice to meet you, and I appreciate you being here. We’ve got slowing growth and we’ve got sticky inflation at the same time. What does that do for the Fed, as far as where you’re positioned?

Drew Matus: Well, I think what you really have to think about with the Fed, right, is where are they heading and how fast are they trying to get there. And I think you can best equate Kevin Warsh to the pizza delivery guy who’s got the address for the delivery but can’t see any of the street numbers, right? And so he’s just going to drive really, really slowly and then stop and start a bunch.

And so that’s what we’re seeing. You know, everyone got excited about, hey, maybe with higher inflation, October is in play for the FOMC. And then Kevin Warsh comes out and says, well, you know, I’m not really sure. I can’t see the number, right? And so now we’re back to December. Of course, it didn’t really help the markets today, right? Because people are kind of concerned about the overall... Hey, you know what? If you’re in the equity market, you have to be creating value, and interest rates, it would help if they were stable. And unfortunately, we’ve got this inflation story, and we’ve got a growth story that’s negative, and that’s a bad combination for financial markets.

JD Durkin: October 28th, the next and second-to-last FOMC meeting, and then that last one in December. Your expectation: what do you think the Fed will do at those two meetings? But also, at this point, hey, it’s the heart of Q4. Into early 2027, your expectations for interest rate hikes, which were not really on the dance card when we came into 2026.

Drew Matus: Yeah, certainly. So we think they skip this meeting because he doesn’t know where he’s going, so he’s not in a rush to get there. So we think he goes in December, kind of a nice, stable “hey, we still care about inflation” story, even though that’s probably not meaningful. And then if we think about March, that’s probably where I’d put the next one. I don’t think he’s going to go in January. They want to be updating their forecast and moving rates at the same time. And that way, every time they have to report that inflation is not hitting its target, they’re doing that with a rate increase.

JD Durkin: Drew, I wonder how you’re thinking about some of these pressure points, in particular yields, down here at the big board. We’ve got the 10-year Treasury yield up one basis point today, 5.08, down off of where it’s been, but still kind of at a multi-decade high. Your expectation for how the 10-year plays itself out?

Drew Matus: Well, so I tend to think of the world in two ways. It’s either normal or abnormal. And I know for a lot of people who kind of entered the industry before or after 2008, everything looks abnormal, and yields look really, really high. This is the way the world has always been, and we’re getting back to it. And we should actually take some comfort in the fact that there’s a price to money.

JD Durkin: Yeah, I really like that a lot. I know that you said, when it comes to AI, picking winners and losers sounds easy. Maybe it’s not quite as obvious as a lot of people think. Where are you still seeing some of the biggest opportunities?

Drew Matus: Well, so that’s the thing, right? If you think back to the dot-com story in 2000, everyone thought they could choose the winners and losers, and most of them were wrong, right? Where the value actually tends to be in any sort of technological change is in people who learn how to use the technology, companies that figure out how to use it, because then they can do more. They’re more productive, and they outpace their competitors.

JD Durkin: I’ve got about a minute left. You have suggested return-to-office policies may be a bigger threat to jobs than the general artificial intelligence-related displacement story. What do you see, and what are you tracking there, Drew?

Drew Matus: Well, so I think you have to think of it this way, right? If you take the average person, and it takes 500 hours to train them, when they were in the office 40 hours a week, it took you 12.5 weeks to get someone up to speed. Now it takes you 20, because they’re only in the office three days a week. All of a sudden, that junior employee costs 60% more, maybe. And if that junior employee is going to cost 60% more, maybe just hire someone with experience. And we’re seeing that in the data: there’s a preference for experienced workers, to the detriment of younger workers trying to enter the labor force.

JD Durkin: Drew Matus making his, I believe, Taking Stock debut. Is that right? It’s the first time he’s worked with us, and it won’t be the last. Please come back and see us. You’re in now.

Drew Matus: Thanks for having me.

JD Durkin: Kick things off. Chief market strategist at MetLife Investment Management. Enjoy your weekend. We’ll talk again soon.

Slowing growth and sticky inflation are creating a difficult backdrop for the Federal Reserve and financial markets as investors weigh the timing of the next rate hike. On Taking Stock, JD Durkin speaks with Drew Matus, chief market strategist at MetLife Investment Management, about the Fed’s path under Chair Kevin Warsh, Treasury yields, AI investing, and why return-to-office policies may pose a bigger threat to jobs than AI.

Matus compares Warsh to a pizza delivery driver who has the address but cannot see the street numbers, moving slowly with plenty of stops and starts. He says markets got excited about an October rate hike after higher inflation data, but Warsh’s uncertainty has pushed expectations back to December, calling the mix of rising inflation and negative growth a bad combination for financial markets. He expects the Fed to skip the October 28th meeting, raise rates in December, and likely hike again in March, aligning rate moves with updated forecasts. With the 10-year Treasury yield around 5.08%, he argues that today’s yields reflect a return to normal and that investors should take some comfort in money having a price again.

On AI, Matus says picking winners and losers is harder than it looks, pointing to the dot-com era, and argues that the real value often goes to companies that learn how to use new technology to become more productive. He also says return-to-office policies may be a bigger threat to jobs than AI, explaining that if training takes 500 hours, a worker in the office three days a week takes 20 weeks to get up to speed instead of 12.5, potentially making junior employees about 60% more expensive. He says the data already shows a preference for experienced workers, to the detriment of younger workers entering the labor force.

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