According to the CME FedWatch Tool, the odds of a first rate cut in June fell 6% compared to a month ago. Fueling this debate is mixed messaging from Fed leadership and an influx of inflation data that shows how well certain aspects of the economy are performing.

Mizuho Securities USA Chief Economist Steven Ricchiuto joins the Morning Brief to discuss the potential for interest rate cuts and how the Fed is acting in this current economic cycle.

Ricchiuto explains that the Federal Reserve "clearly" wants to cut rates: "The Fed is dominated by doves. It is not dominated by inflation-fighting hawks. It's dominated by people who want to keep the labor market tight in an attempt to maximize social welfare from that angle as opposed to constraining inflation, which had been the prior approach of the Federal Reserve to maximizing social welfare. So this is a changed Federal Reserve. So they want to cut rates."

However, the economy is standing in the way of the Fed's desire to cut rates, Ricchiuto says: "The Fed is fighting the economy, in particular they're fighting the American consumer and that's a fight that I would not want to get involved in."

For more expert insight and the latest market action, click here to watch this full episode of Morning Brief.

Editor's note: This article was written by Nicholas Jacobino

Video Transcript

JARED BLIKRE: Odds of a rate cut in June falling from a month ago by around 6%, leaving investors increasingly split on whether we just see that first cut in June. And so far, resilient economy and sticky inflation reports have investors assessing where the economy is going to land. With more, here we have Stephen Ricchiuto, Mizuho Securities US Chief Economist Fixed Income. Thank you for joining us here today. Just your thoughts on where we are with the Fed and the rate cuts, maybe you're listening to our discussion, the ECB kind of front running the Fed. What are your thoughts about the overall situation?

STEVEN RICCHIUTO: Well, I think what you're seeing is an environment where you have a Federal Reserve that clearly wants to cut rates. Let's be honest. The Fed is dominated by doves. It is not dominated by inflation fighting hawks. It's dominated by people who want to keep the labor market tight in an attempt to maximize social welfare from that angle as opposed to constraining inflation, which had been the prior approach of the Federal Reserve to maximizing social welfare. So this is a changed Federal Reserve. So they want to cut rates.

The problem is, they want to cut rates but the economy is standing in its way. So people ask me with your no-rate cut call for 2024, aren't you fighting the Fed? And my answer is very simple. The Fed is fighting the economy. In particular, they're fighting the American consumer. And that's a fight that I would not want to get involved in.