March’s Personal Consumption Expenditures (PCE) data arrived hotter than expected and GDP figures point to an economic slowdown. In this environment, economists and investors alike are revisiting the Federal Reserve’s rate cut outlook. Stifel Financial Chief Economist Lindsey Piegza joins Yahoo Finance to discuss the prospects for Fed cuts.
Piegza notes that although March’s PCE did not show "a material increase" in inflation, the Fed had been "expecting a sizable reversal" supporting the disinflationary trend. She suggests that this report could force another adjustment to the Fed’s outlook and further delay any near-term rate cuts, with the possibility of rate hikes even coming back into consideration.
Regarding consumer behavior, Piegza acknowledges that the consumer remains "very resilient." However, she observes that consumers are becoming more cost-conscious, carefully weighing their spending decisions and seeking value, leading to a slowdown in "broad-based growth."
"Without more of a meaningful decline or improvement in inflation, after that minimal concession, I think the Fed’s hands are tied, and we’d likely see the Fed move back to the sidelines for a second, extended pause," Piegza tells Yahoo Finance.
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