With the Federal Reserve's next meeting approaching, investors are closely watching for signals about monetary policy direction. Bryant VanCronkhite, Allspring Global Investments senior portfolio manager joins to share his insights.

VanCronkhite emphasizes that despite the ongoing third-quarter earnings season, the Federal Reserve's trajectory for interest rates remains "in control" of market direction. He highlights two key factors: In the short term, investors are focused on labor market dynamics and their impact on inflation expectations. In the long term, he raises the critical question, "What happens if the Fed loses credibility?"

"My view is they probably want to pause here, digest some more data, and not be bullied into an additional 50 basis point cut coming up in the next month or two," VanCronkhite explains.

He further outlines two main challenges affecting the Fed and inflation: supply-side issues that "the Fed really can't control," such as labor strikes and geopolitical tensions, and demand-side factors where "the labor situation is still not fully in balance," coupled with rising fiscal spending.

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This post was written by Angel Smith