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Investors are closely watching for signs that a Fed rate cut is imminent after February’s CPI beat expectations. Liz Young, head of investment strategy at SoFi, joins her on Yahoo Finance Live to analyze the market reaction.
Young noted that the market is not reacting to the CPI data itself, but rather to recent dovish comments from Fed Chairman Jerome Powell, who signaled a desire to cut interest rates later this year. But Young emphasizes that the Fed is wary of allowing inflation to be “locked in” as measured by inflation expectations.
He said the rise in breakeven interest rates, a measure of inflation expectations, signals a risk that the Fed is “more resilient than equities and has a higher pain threshold” if the central bank opposes rate cuts. He emphasized that this could have an impact on investors.
Young said the Fed’s communication on expectations for rate cuts was “very vague” and Powell reiterated that the Fed needs to be “confident” in achieving its 2% inflation target before starting to cut rates. Ta. “That last five pounds that you’re trying to lose is always the trickiest, and that’s where we get stuck. And what gets stuck from there is service inflation,” Young told Yahoo. He added that the Fed will need to recognize the less-than-encouraging inflation statistics, which are currently showing a “plateau.”
For more expert insights and the latest market trends, click here to watch the full episode of Yahoo Finance Live.
Editor’s note: This article was written by angel smith
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