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The latest inflation report was hotter than expected, and it’s going to get worse
The Street
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6/27/2025
Gene Goldman, Chief Investment Officer at Cetera, joins TheStreet to explain why inflation isn’t getting better any time soon.
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Transcript
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00:00
So first, I want to get your reaction to the latest inflation data basically came in line
00:05
with expectations, although core inflation a little hotter than expected. What's the big
00:09
takeaway there? Yeah, so first of all, core PCE, the Fed's preferred measure of inflation,
00:13
as we all know, came in hotter than expected. It's the first time it's risen since February
00:18
of this year. I think it's an important number, you know, whether it's up a little bit or a lot
00:22
of it. I don't think we weren't too worried because we know inflation is coming. I think
00:25
what really worried me more was personal income and personal spending actually deteriorated.
00:30
And that suggests that there's more pressure on the economy. And what you know, I have talked
00:34
about before is that the pressure on the economy suggests the Fed should cut rates, but inflation,
00:39
the Fed can't cut rates. So they're in this whole spectrum where they're trying to balance both
00:44
sides. Of course, it's their dual mandate, but they're willing to sacrifice the economy in order
00:48
to fight off inflation. But the inflation number was stronger than expected. And we've been saying
00:53
this. The one thing you and I talked about before is that tariffs are deflationary at first
00:57
because they impact economic growth, they're demand destruction, but then they also put pressure
01:03
on economically sensitive commodities like energy, oil, like copper. So it's always deflationary
01:10
at first. We're going to start seeing the numbers in July. I definitely believe we will. And you're
01:14
already seeing inflation numbers pick up in PMIs and flash readings from manufacturing. Like even earlier
01:22
this week, we saw PMI prices came in well above expectations. And 70% of companies said they
01:29
are raising prices, pushing them out to consumers. And as another note, CFO study came out yesterday,
01:34
two days ago from the Fed. And if you read between the data, one of the Fed's special questions was
01:39
about tariffs. And 41% of CFO said they're raising prices, passing on costs to consumers. That's
01:45
inflation. Inflation is going. In that environment, as I've said to you before, the Fed can't cut
01:49
rates as much as they said it would. So the takeaway is that inflation is going to get worse.
01:55
Yeah, that's my opinion. It will get worse. So those hopes that the Fed is going to cut rates
01:59
as soon as July are off the table now? Yeah. I mean, I think even like even Powell's press conference
02:05
at the last Fed meeting, he said, we want to see more summer data to gauge the impact of inflation.
02:10
That just says nothing in July. On the other hand, you have like Waller and Bowman, everyone coming out
02:16
saying they should cut rates in July. I don't think that's the case. They can't cut rates.
02:19
They won't have enough data points at this point to actually make that.
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