The US stock market (^DJI, ^IXIC, ^GSPC) is making moves to the upside following the Federal Reserve's decision to pause interest rates and Chair Jerome Powell's press conference. Vanguard Global Head of Portfolio Construction Roger Aliaga-Diaz joins Yahoo Finance to comment on the biggest challenges on the Fed's horizon whenever it starts to cut rates in 2024.

"With higher growth this time comes higher inflation. So whether we're going to have that tailwind... is still yet to come," Aliaga-Diaz says. "In our view, inflation will remain stubborn. We think the Fed has more revisions to do in terms of the rate cuts and we feel it will be very difficult for them to get through that first cut unless the inflation picture really starts moving downward."

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 Luke Carberry Mogan.

Video Transcript

JOSH LIPTON: Let's now welcome in Roger Aliagas-Diaz, Vanguard global head of portfolio construction. Roger, it is good to see you. So we have a rally here on Wall Street. Roger, I'm looking here just green across the screen. All three major averages S&P 500 breaking above 5,200 for the first time Roger. But let's get your reaction. What did you make of what the Fed did and said today?

ROGER ALIAGA-DIAZ: Yeah. I know, I think the market reaction is understandable at the surface, the S&P that you guys were just describing, it seems very dovish. So they revise up the growth projections, they revised up the inflation projections. They were at 2, 4 before there are 2, 6 now. Yet, they still think they will cut three times this year. So that is a very dovish signal to the market. And I say the surface because below the surface, how the different dots move shows a little bit more-- less easy.

JULIE HYMAN: Roger, Julie here. Did I say Goldilocks, is it time to bring back that word?

ROGER ALIAGA-DIAZ: Well, it's certainly Goldilocks was last year and the question is if those same supply side forces that Powell referred to in the conference will continue. Because with higher growth, this time comes higher inflation. So whether we're going to have that tailwind, that really allowed the Fed last year to have high growth with lowering or decreasing inflation is still yet to come.

In our view the inflation will remain stubborn. We think that the Fed has more revisions to do in terms of the rate cuts. We feel that it's going to be very difficult for them to get to that first cut unless the inflation picture really starts moving downwards.