Don’t be optimistic and interpret Vosh’s remarks as a straightforward positive for rate cuts this time.
He clearly stated that the 2% inflation target will not change, but the current data is not yet sufficient to prove that inflation is returning to 2% quickly. This is crucial.
What the market wants to trade most right now is a rate cut—but what the Fed truly cares about is inflation.
If the subsequent PCE and CPI data continue to improve, expectations for easing will naturally heat up;
but if inflation proves to be erratic, rate-cut expectations will be repriced just the same.
So at this stage, I actually think we should stay a bit cautious.
The market can price in rate-cut expectations early, but before liquidity truly turns more accommodative, expectations are ultimately just expectations.
The hotter the market has been recently, the more you can’t look at only prices—the macro story hasn’t really run its full course yet.