T. Rowe Price Chief U.S. Economist Blerina Uruci joins Yahoo Finance Live to discuss January CPI data, inflation, Fed policy, consumer spending and trends, and the outlook for markets.

Video Transcript

- Well, let's keep the conversation going here. Let's welcome in blue Blerina Uruci, who is the Chief US Economist at T Rowe Price. How about your reading on where we sit with some of the economic data that's come out over the course of this week, and what that all means for what the Fed may do next from here.

BLERINA URUCI: Thank you for having me. Yeah, great discussion on the details of the CPI report by the way. And what I would highlight is this. That even though it came in line with consensus expectations, it doesn't mean that it's good for the markets or it's good news for the Fed. What we saw was that the sequential pace of inflation actually strengthened a little bit. And we know that the road to normalizing inflation and bringing it back down to the Fed's 2% target is going to be a bumpy and long one.

But I think what this report highlights is that there are some risks here, that the progress that we've seen on inflation may be stalling if the economy rebounds as the January data so far suggests. And what data are we talking about here? It's the retail sales report that we saw this morning. That suggests that consumer spending rebounded quite strongly in January after the slowing in Q4 of last year.

And I think here it's very interesting with the retail sales report. Because we know we're going through a process of transition from spending on goods and towards services. And we've seen that in the PC consumption data so far. But what the retail sales report for January suggested is that goods in this transition are not really suffering a ton. And so I think this in itself could put a little bit at risk the progress we've seen in goods inflation in the tail end of last year.

- If we can dig into this a little bit more, Blerina, because we saw, for example, department store sales up big in January, 17 and 1/2. Electronics sales were up, which surprised me. I have seen some theorizing that people were waiting for post holiday sales. In looking at retail results, discounting is rampant. So I wonder if you can get that sweet spot where prices are not increasing on those goods, but people are still spending.

BLERINA URUCI: Yes. And this is why I think the Fed is also not overreacting to one month's data. We know that in January we also have some seasonality issues, with both the payroll report and consumption data. So we need more than a couple of months to make sure that this is a trend and it's not just driven by one off discounts.