The Fed’s credibility concern raises the hurdle for rate cuts, economist says

From youtube.com/yahoofinance

With a litany of economic data released this week, including Friday's Personal Consumption Expenditures (PCE) Index, the debate as to when the Federal Reserve will cut interest rates continues. While some parts of the economy have cooled, the US labor market has consistently reported huge jobs gains. On top of managing its dual mandate for inflation, the Fed faces mounting policy challenges as the 2024 presidential election draws closer. PGIM Fixed Income Chief US Economist Tom Porcelli joins Yahoo Finance's Madison Mills and Seana Smith to give insights into the Fed's next policy decision as the country gears up for election season as well as dealing with current market conditions (^DJI, ^IXIC, ^GSPC). On the timing of cuts around an election cycle, Porcelli states: "When the Fed has adjusted policy around an election, there's been an overwhelming reason for them to do it. Right now, I would argue, it's probably going to be pretty debatable, and I think in a debatable backdrop, I think the Fed would want to veer away from adjusting policy... If you don't get the string... like [Fed Chair Jerome] Powell keeps on saying he wants to see a string of good inflation reports, that will push the July cut, which they could potentially do, way out to December. Because I think, again, around an election, unless... it's an overwhelming sort of reason for them to cut, I think they're not going to be able to go in September or November, so that would push it out to December."