As the Federal Reserve prepares to decide on rate cuts on Wednesday, markets are trading higher Monday. PGIM Fixed revenue Co-Chief capital Officer Gregory Peters joins The Morning Brief to provide insights into the rate cut outlook.
Peters suggests that the Fed meeting on Wednesday may not be “all that interesting,” as Chairman Jerome Powell may need to “walk back being more dovish” in light of the hot inflation data failing to align with the Fed’s target. This scenario could compel the central money institution to hold rates steady and refrain from implementing rate cuts. While Peters acknowledges the potential for a rate hike, he notes that “it’s not the base case.”
The “root cause” of the Fed’s rate-cut apprehension is “a positive story,” Peters says. He points to the robust state of the economy, coupled with slightly higher inflation, as a backdrop that is “favorable for broad earnings.”
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