The Federal Reserve’s cautious approach to interest rate policy over the past year has translated into a philosophy of constant data monitoring. But with Friday’s PCE results showing that March prices rose more than Wall Street expected, it’s likely that officials will “wait and see” for a new round of economic data.
“When it comes to inflation, the Fed cannot take a break,” analysts at Bank of America Global Research said in a note Friday. “At next May’s FOMC meeting, we believe the Fed will take a wait-and-see approach to cuts while giving monetary policy more time to work.”
The core PCE index, which does not take into account the cost of food and energy and is closely monitored by the Federal Reserve, rose 2.8% from a year earlier in March. This figure was above estimates of 2.7% and unchanged from the annual increase seen in February.
The latest in a series of warmer-than-expected reports dampened expectations of an imminent rate cut. Fed Chairman Jerome Powell stressed that the central bank would not cut rates until officials were convinced that inflation was declining.
Still, some analysts, like many investors, are undeterred by the idea of higher interest rates for a longer period of time.
“We remain bullish on the market, however, as we believe rate cuts are not necessary for the bull market to continue,” Chris Zaccarelli, chief investment officer of Independent Advisor Alliance, said in a note Friday. “Instead, it is continued economic expansion and corporate profit growth – already seen among the largest companies in the market – that will propel stock prices to new heights.
He added: “Just know that volatility around elections, geopolitical events and even future inflation data is likely; things won’t go smoothly this year.”
News Source : finance.yahoo.com
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