Yahoo Finance

All right, let's talk about economic data and sentiment, as we've been talking about. Investors awaiting the Fed's latest interest rate decision at this week's Federal Reserve policy meeting. The meeting coming as inflation and economic worries are growing. Yahoo Finance's Alexandra Canal joins us now with more, and uh, our stagflation watch, I guess.

Yeah, stagflation watch. And you know, right now, we're seeing this two-day rally in stocks, but it's really that FOMC meeting on Wednesday that could potentially derail this comeback. And as we look ahead, it's really not about the actual decision. Because we know with almost 100% certainty that the Fed is going to hold rates steady. Jerome Powell has indicated that. Markets are pricing that in. So it's really going to be that post-decision press conference, along with the summary of economic projections. That's going to be the thing that captures investor attention. So, think projections like the dot plot that maps out where interest rates could be heading, along with other indicators like GDP, inflation, as well as the unemployment rate. And this will be important because markets have really been spooked that we're entering this period of stagflation, that's where growth stalls and inflation remains sticky. We've seen several Wall Street firms reducing their respective growth targets for 2025 as a result. That's been followed by a handful of downward revisions for year-end S&P 500 targets. So, analysts are saying here that Jerome Powell is going to have to really thread this stagflation needle. He's spoken before about how the hard data remains solid, while it's really that soft survey data, like consumer sentiment, consumer confidence, ISM manufacturing, that that hasn't really been a good indicator when it comes to future conception. At least that's according to Powell. But that really is the data that's surprised to the downside recently and has pointed to these heightened inflation risks. So, he's going to have to reiterate that stance. He's also going to have to indicate that inflation remains on the path to 2%, even amid some of these near-term hurdles. We did see a deceleration in price growth for both consumer and producer prices during the month of February. But underneath the hood, the components that feed through into core PCE, that's the Fed's preferred inflation measure, those remain especially sticky. And we haven't even really seen the full impact of tariffs yet. So, if we take a look at those December projections on your screen, core PCE was previously projected at 2.5%. For rate cuts, the Fed previously priced in two rate cuts to come this year. Markets are currently at around three due to some of those growth concerns. And then speaking of growth, GDP previously forecasted to hit 2.1% in 2025. Now, Goldman Sachs saying that FOMC participants, they're likely going to adjust to a bit more cautious tone until that tariff policy becomes more clear. They're expecting the median projections for core PCE to inch up to 2.8%, and for GDP growth to slow to 1.8%, mainly reflecting the tariff news. So, moral of the story here is that we have a lot of policy uncertainty, a lot of tariff uncertainty. And Jerome Powell, markets are looking towards him and the Fed to really guide us, to really help make sense of all of this. Um, but that's a really tall order, especially since we've seen a pretty big selloff over the past month.

As usual, I do not envy him his job. Nope, not at all. Thank you so much, Ali. Appreciate it.