In a speech Thursday, Federal Reserve Chairman Jerome Powell reiterated his commitment to getting inflation down to the central bank's 2% target. Powell cautioned, however, that if economic data continues to be strong, it could warrant further rate hikes. RiverFront Global Fixed Income CIO Kevin Nicholson tells Yahoo Finance Live that Powell "hedged his bets at every turn" in the speech, adding that he expected the Fed to raise rates one more time this year. When it comes to the Fed cutting rates, Nicholson says that the strength of recent data "leads me to believe that the Fed is not going to cut rates at all in 2024."
JULIE HYMAN: Let's get another perspective on all of this. Stocks are, as we said, trading lower as investors price in recent earnings results and commentary from Fed Chair Powell. He acknowledged in a speech today the resiliency of the US economy and says the committee will proceed carefully with its decisions on monetary policy. He also said of the Fed's inflation fight that maybe we just need to get more time.
JEROME POWELL: It may just be that rates haven't been high enough for long enough. And again, it's all happening in a context of very strong demand.
JULIE HYMAN: And Powell's comments come as we've been talking about as the 10-year yield nears 5%. For more on the Fed and the recent moves in the bond market, we turn to Kevin Nicholson, RiverFront Investment Group Global Fixed Income CIO.
Wooh, it's quite a day for you, Kevin. Listening to these comments, watching the action in the bond market, first of all, what is your reaction to Powell's speech? Is it hawkish? Is it dovish? Was there not a clear message in there at all?
KEVIN NICHOLSON: Julie, there wasn't a clear message because he hedged his bets at every turn. However, my reaction to his speech was much-- I really didn't have a reaction because seeing how strong the economy has been, I had expected for the Fed to raise rates once again this year before actually pausing and keeping rates higher for longer. So I think that this was all in preparation in preparing the markets for what is to come.
JOSH LIPTON: And so, Kevin, so listen, I think a lot of investors are with you. They see higher for longer now. But when do you think-- I'm just interested, Kevin. When do you think the Fed could actually start thinking about cutting? Is that a 2024 dynamic?
KEVIN NICHOLSON: Josh, had you asked me this a couple of weeks ago, I would have said probably at the end of third quarter of 2024. However, seeing the strength of the economic numbers that have been coming out, it really leads me to believe that the Fed is not gonna cut rates at all in 2024. And it won't be until 2025 that we actually start seeing them uncut rates.