The Federal Reserve aims to approach inflation and rate adjustments with a "more cautious" tone in 2025, Fed Chair Jerome Powell explained in a press conference on Wednesday after the central bank cut interest rates by another 25 basis points.
"When you consider what he said relative to what we, most of us thought he was going to do, I think it was pretty in line," PGIM Fixed Income chief US economist Tom Porcelli says, underlining the dramatic sell-off equities experienced after Powell's comments. "One of the biggest challenges for the Fed is... they keep on saying they're data dependent. But I actually think that's not quite right — I think they actually are data point dependent."
Porcelli joins Catalysts hosts Seana Smith and Brad Smith for a conversation about how the Fed is using and interpreting economic data points — such as monthly employment figures — in its forecasts: "The problem for the Fed right now is one of narrative. And the unfortunate truth is we're dealing with some really volatile data."
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Porcelli also comments on the Fed's 2025 inflation outlook and how the bond market (^TYX, ^TNX, ^FVX) has been responding.
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This post was written by Luke Carberry Mogan.