[Music] The annual inflation rate hit 3.5% last Month that's the highest it's been since September with prices on the rise it Could mean the Federal Reserve will hold Off on cutting interest rates Dow Jones Fell 400 points on Wednesday let's bring In Martin beerx he's the senior editor And chief markets correspondent at the Street Oh Martin why to go Up that's a great question John we saw a Massive bet in the bond Futures market Yesterday and that usually means that Someone is trying to hedge themselves Against the surprise so we were braced For this kind of movement to the upside But I don't think anybody expected it to Be this past and I think that's why you See the reaction if you're digging into The numbers though essentially what We're seeing is that the quicker Inflation is tied to a stronger economy There's no question about that but we Are seeing price pressures and things Like Hospital Services uh in insurance And in rents and those are things that Don't necessarily have much of an Influence with respect to interest rates So they could stay hot for a number of Months now and that really what that's Sort of what has markets worried right Now and so so that's really interesting So what do you think this means for the Federal Reserve particularly if it's
Items that Federal Reserve policy Doesn't maybe necessarily affect Directly this is where they find Themselves John and it really is a Difficult situation because they had Primed the markets for three rate Cuts This year and as we sit now it's very Likely that we're going to have the Longest gap between the last rate hike And the First Rate cut on record and That's of course if we get something in July it might be September it might be Beyond so the FED is going to have to Sit tight preach more patients to an Impatient Market as it looks to see how Some of these influences filter through Into the economy gratefully growth is Still solid we're adding jobs activity Is quite strong and we're seeing a Decent amount of consumer spending but All of that John comes with the price And in this case it is that faster Inflation and so everybody's impatient For the rate Cuts uh remind us why it's A bad idea or to cut rates too early or Why it could be a bad idea to cut rates Too early there's no joke John that says The FED tends to go up the escalator When it comes to raising rates and down The elevator when it comes to cutting Them in other words they like to be in a Singular Direction and therefore they Are quite careful when they pivot they Don't want to Pivot and then have to
Raise again if it turns out that they Were incorrect about inflation and They've already been caught on the back Foot with that transitory debacle from a Couple of years ago as we exited the Pandemic so they do want to be Absolutely precise as to the timing of The cuts but as I say they are having to Speak to a market which has been betting On six Cuts paired those bets down to Three and now is likely looking at two And maybe even one and John one of them Is very likely to come smack in the Middle of the presidential campaign in The fall which will have its own uh the Market will belch a couple of times if That happens what help us think about The broader economy here um what the Fed's action or lack of action will mean For the broader economy as you say the Economy is quite strong um so what how Should we think through this next period Now that we have these new numbers and As you've so clearly laid out we might Not have cuts for a while this is just It I I I think John that you're serving Two monsters at the point of view of the Fed firstly you have to deal with Market Anticipation and their assumption that a Rate cut is going to come in the fall But at the same time if a rate cut does Come more quickly that's probably not Going to be good news for most Americans Because it would suggest that the
Economy is slowing into the second half Of the Year there isn't much signal to That effect at the moment as you noted 303,000 new jobs were added to the Economy last month activity benchmarks Are are looking strong and consumers are Relatively confident but if there is a Change and there are some cracks deep Underneath that economists are warning About and we start to get a Slowdown Into the second half of the year then The FED might find itself in a very Difficult quandry where inflation is Still high but growth is slowing and no Longer do we have a soft Landing but we Have the Spectre of station and that's Absolutely something no one wants right Exactly the worst of all worlds Martin Beerx with the street thank you so much
