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CPI data: Services sector is keeping inflation 'stuck'

Investors are closely watching for signs of an impending Federal Reserve rate cut following February's hotter-than-expected CPI print. SoFi's Head of Investment Strategy Liz Young joins Yahoo Finance Live to dissect market reactions. Young notes that markets are not responding to the CPI data itself but rather to Fed Chair Jerome Powell's recent dovish comments, which suggested a willingness to cut rates later this year. However, Young emphasizes that the Fed is wary of allowing inflation to become "entrenched," a quality that is measured according to inflation expectations. She highlights that the rise in breakeven rates, a measure of inflation expectations, signals a risk that the Fed "has more stamina and a higher threshold for pain than stocks," which could impact investors if the central bank opts against rate cuts. Young describes the Fed's communication on rate cut expectations as "intensely vague," with Powell continuously stating the Fed's need to "feel confident" about reaching the 2% inflation target before initiating cuts. "That last five pounds that you're trying to lose is always the peskiest, and that's where we're stuck. And the thing that's keeping it stuck there is services inflation," Young tells Yahoo. She adds that the Fed will have to acknowledge the less-than-promising inflation data, which presently indicates a "plateau." For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live. Editor's note: This article was written by Angel Smith


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