First quarter GDP figures were softer than expected, rising 3.0% compared to analysts’ anticipated 3.1%. However, investors may wonder what this number means for future Federal Reserve rate cuts. Wolfe Research Chief Economist Stephanie Roth joins the discussion to provide insights into the Fed rate cut outlook.
Roth notes that this GDP figure proves rates are impacting the economy, "and that’s what they are supposed to be doing." She adds that this economic dynamic will allow the Fed "to start easing financial conditions" later this year. While the economy is cooling, it is "still healthy," which could pave the way for a rate cut to materialize by September.
For the Fed to feel comfortable cutting rates, Roth mentions that it will likely need to see three consecutive inflation prints that demonstrate progress on inflation. She also notes that core PCE should trend near 0.2% "for at least two more months for the Fed to feel comfortable cutting rates in September."
However, with the April core PCE data set to be released tomorrow, Roth says, "It’s going to be really hard to get a big surprise tomorrow."
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