Financial advisors expect latest inflation data to cool Fed’s jets
Financial advisors, characteristically not known for making rash decisions or succumbing to knee-jerk reactions, are soaking up the latest inflation data and generally acknowledging some shifting economic tides in the works.
“I think it means the higher fed funds rates are slowing inflation as desired, and the markets are progressing much as we expected, although it’s been better than we expected in 2023 thus far,” said Tim Holsworth, president of AHP Financial Services. “The slowdown in inflation also appears to lessen the chance we will see an all-out recession.”
Wednesday morning’s report from the Bureau of Labor Statistics surprised some market watchers by showing consumer prices in June rose by 3%, which is the lowest inflation rate since March 2021 and below analysts’ expectations of 3.1%.
As anticipated, the equity markets saw the news as a reason to rally and bond yields began pulling back, because the markets are taking the latest consumer price index data as a sign that the Fed might stop raising rates for a while.
“I don’t think the Fed should raise rates more from here, and the futures markets suggests a reduction in rates as early as September but I don’t think that’s going to happen,” said Joe Rinaldi, chief investment officer at Quantum Financial Advisors.
“Clearly, CPI is trending downward and that just confirmed the Fed has done what it was supposed to do,” he said.
The Federal Reserve held rates steady in June after a string of 15 consecutive hikes as it scrambled to tamp down the runaway inflation that resulted from the record level government stimulus spending during the Covid pandemic. Rinaldi is among those who believe the Fed should pause again in July.
“You want to make sure inflation is dead,
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