Inflation: Is the Fed ready for rate cuts in spring 2024?
Stocks are on track for their best month of the year as investors wage bets on when the Federal Reserve will cut rates. According to the CME's FedWatch tool, traders are now pricing in a 75% chance the Fed will start cutting interest rates in May. Invesco Chief Global Market Strategist Kristina Hooper told Yahoo Finance the market isn't responding too aggressively to the rate-cutting stance, saying she's optimistic inflation will continue to trend lower.
"I would argue that you don't have to have grim data in order to see rate cuts," Hooper told Yahoo Finance Live. citing recent comments from Fed Governor Christoper Waller.
Click here to watch the full interview on the Yahoo Finance YouTube page or you can watch this full episode of Yahoo Finance Live here.
This post was written by Luke Carberry Mogan.
Video Transcript
- It is the last trading day of a big November for stocks equities on track for the best month that we've seen in more than a year.
We got the latest reading on inflation.
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Core PCE or PCE coming in in line with expectations.
The core number cooling compared to what we saw about a year ago of 3.5%.
We want to bring in our next guest to talk a little bit more about this.
We have Kristina Hooper, Invesco chief global market strategist.
Kristina, it's good to see you here.
So when you take into account what we just saw with this core PCE number ahead of the bell this morning and pair that with the rally, the excitement that we've seen over the last several weeks, do you think the market has gotten a little bit too excited in terms of pricing in a rate cut in May?
KRISTINA HOOPER: Well, I certainly think the market is excited.
But I don't disagree about the price cut.
I think we're likely to see that.
Very likely to see that.
Even though the Fed is telling us or most members of the Fed are telling us otherwise, they're incentivized to talk down markets because they don't want financial conditions to ease too much.
So I think it's very understandable that we're getting this language.
We probably will see some movement down in markets, some tamping down in markets.
But the reality is that inflation is coming down.
We are on the D train.
And D means disinflation.
And we are headed for, in my opinion, the start of rate cuts in the spring.
- OK, if we did see rate cuts in the spring and I will say we certainly do value these conversations a lot.
We've just had Mary Daly coming out this morning saying that that's not on the table for them right now.
Where and what data would the Fed have to look at and say it's so grim that we can't help but to cut rates?