The Federal Reserve announced on Wednesday afternoon that they will hold rates steady. However, central bank officials are still indicating that three rate cuts are likely to materialize in 2024. Morgan Stanley Investment Management's Chief Investment Officer of Broad Markets Fixed Income Michael Kushma joins Yahoo Finance Live to discuss why he believes the Fed is proceeding with caution.

Kushma stated, "They do not have to adjust monetary policy in any significant way this year" in order to achieve inflation targets. He added that this announcement "steadies the markets," and that the Fed is "on track" when it comes to meeting its objectives.

Kushma characterized officials' projections of an uptick in core inflation as a "realistic" move by the Fed. Kushma argues that the first quarter of 2024 has been "quite disappointing," with inflation data not supporting the Fed's goal of bringing inflation down to its 2% target. However, he notes the Fed has "upgraded their growth forecasts across the board" due to the economy being stronger than expected.

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

Video Transcript

JULIE HYMAN: For more on what we heard from the Federal Reserve, already today, three rate cuts forecast for 2024, what this means for investors. Let's get to Michael Cushman, Morgan Stanley Investment Management, CIO, and broad markets fixed income head, good to see you Michael, thanks so much for being here. So first blush reaction here, do you think that the Fed is managing the market's expectations appropriately?

MICHAEL CUSHMAN: I think they're doing a good job of steadying the ship, that there's no change in their long term views about inflation, which has been underperforming or too high in recent months relative to what people thought is more a blip. It's more an outlier because the 2025 forecast, they will be at where they thought they'd be 3 three months ago.

So no change in their long term view that disinflationary process is on track. They do not have to adjust monetary policy in any significant way this year, in order, to achieve those targets. So it's steady as she goes, there's no reason to think that we're not going to achieve our objectives. So in that sense steadies the market, there's no surprises, everything's OK. And sends on track.

JOSH LIPTON: Michael, they did just looking at their projections here for core inflation that did tick up a bit here 2.6%. I'm just interested, when you look across 2024, the trajectory of inflation, what does it look like to you, Michael?