CNBC's "Money Movers" team discusses the Federal Reserve's decision to cut interest rates, the market reaction and more with Bruce Richards, CEO and chairman of Marathon Asset Management.

Bruce Richards, CEO of Marathon Asset Management, stated that the Federal Reserve has lowered rates by 125 basis points since the previous year and is expected to cut rates by another 125 basis points to reach a 'neutral' 3% inflation rate. He described 3% inflation as the new normal, which, alongside 2% GDP growth, could help the government manage its debt.

Richards also suggested that a new, more dovish Fed chair could accelerate the move to neutral rates and that the Fed may use quantitative easing or similar measures to bring down long-term rates, particularly to support housing and economic growth. He noted that while short-term rates are likely to fall, long-term rates may remain elevated until policy changes occur under new leadership.

Fed is 'halfway' to 'neutral' 3% inflation

Here with us now at Post9 is Marathon Asset Management CEO Bruce Richards. Marathon has $24 billion in assets under management. Great data to have you here, Bruce. Good to see you, Sarah. What's your takeaway from the Fed? Well, since last September, it's been one year now, the Fed has lowered rates 125 basis points. 25 base points this year, but 125 base points since last September. They're halfway there. So they're going to go another 125 base points. Where? To neutral? To neutral, which is 3%. So we're going another 125 basis points, see the 50-yard line, another 125 base points by next September. So there's a few takeaways there. Number one is job growth is slow. That's their cover, why they can lower rates. GDP is growing nicely at 2% if they're a ballot. And inflation is a little sticky at 3%, but that's good for the government, believe it or not, because 3% inflation, and we don't think it goes up from here, we think it's sticky around 3%, that's the new normal. But 3% inflation with 2% growth allows the government to grow out of their debt. They need to inflate their way out. And so it's not the most horrendous thing. So what comes next? What comes next is really important. The next Fed chair next May is going to be a dove, and they're going to bring rates right to neutral as quickly as they can. That's why we're going to get down to 3%, not by the end of next year, by next September. But the second thing that comes, and we see rates trending a little higher now, eight out of the last 14 times that the Fed has actually lowered rates by 100 base points, 10-year notes were higher months later. So it's a random walk. It could be higher, it could be lower. Right now, it's slightly higher. But what comes next is probably QE with a little twist to get long-term rates down, because they not only control short-term rates, which they want to see lower, but they want to see long-term rates down, as we all know, to fuel housing finance. You think the Fed is going to be doing QE with inflation at 3%? At least they'll do a twist. They'll go back to neutral, but they'll let short-term roll off and buy long-term to get long-term down. They want longer rates down. How are they going to do it when they don't control it? That's exactly how they're going to do it. How high would rates have to go, though, for them to do that? No one's talking about that. No one's talking about it. But I think the risk of higher rates here is going to be off the table next May, because you'll see what's going to come next. And so we're all in the camp of, you know, 10-year notes are probably too low relative to 3% inflation. Got it. Agreed. But at the end of the day, the government's going to control this card. I think it'll play a very heavy hand, we believe, in controlling the yield curve going forward, beginning next year. That's what I believe. We'll see what happens. What else do you think they buy? Do you think they could buy MBS or something else? I think they're focused on Treasuries, because MBS will move with Treasuries. But don't we have to wait for a new Fed chair to do that until next May? Yes, that's not happening until next May. I'm saying that's eight months from now. Because you think that that Fed is going to work in concert with the administration to get long-term rates down. That Fed, the chair, and other governors that come with that will be appointed based upon how they think policy should be run. That'll be congruous with how the person that appoints it thinks it should be run. So I don't think there's a big difference, although the Fed will be independent from that point going forward, yes. And do you think it'll work? In other words, would you bet on lower long-term rates? Right now, no, because I think there's a lot of — there's some volatility that could happen between now and then. But come next May, if rates are higher, yes. So you see this pattern continuing of the Fed cutting rates, short-term rates coming down, and, you know, 10-year yields staying high. 10-year rates are probably about where they should be. And I know the government wants to see it lower, because that's the cost of financing, and they want to bring their financing costs down. They want to stimulate housing. They want to stimulate construction and stimulate the economy.

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Breakdown