The latest inflation report was hotter than expected, and it’s going to get worse

Gene Goldman, Chief Investment Officer at Cetera, joins TheStreet to explain why inflation isn’t getting better any time soon.

Transcript

00:00So first, I want to get your reaction to the latest inflation data basically came in line

00:05with expectations, although core inflation a little hotter than expected. What's the big

00:09takeaway there? Yeah, so first of all, core PCE, the Fed's preferred measure of inflation,

00:13as we all know, came in hotter than expected. It's the first time it's risen since February

00:18of this year. I think it's an important number, you know, whether it's up a little bit or a lot

00:22of it. I don't think we weren't too worried because we know inflation is coming. I think

00:25what really worried me more was personal income and personal spending actually deteriorated.

00:30And that suggests that there's more pressure on the economy. And what you know, I have talked

00:34about before is that the pressure on the economy suggests the Fed should cut rates, but inflation,

00:39the Fed can't cut rates. So they're in this whole spectrum where they're trying to balance both

00:44sides. Of course, it's their dual mandate, but they're willing to sacrifice the economy in order

00:48to fight off inflation. But the inflation number was stronger than expected. And we've been saying

00:53this. The one thing you and I talked about before is that tariffs are deflationary at first

00:57because they impact economic growth, they're demand destruction, but then they also put pressure

01:03on economically sensitive commodities like energy, oil, like copper. So it's always deflationary

01:10at first. We're going to start seeing the numbers in July. I definitely believe we will. And you're

01:14already seeing inflation numbers pick up in PMIs and flash readings from manufacturing. Like even earlier

01:22this week, we saw PMI prices came in well above expectations. And 70% of companies said they

01:29are raising prices, pushing them out to consumers. And as another note, CFO study came out yesterday,

01:34two days ago from the Fed. And if you read between the data, one of the Fed's special questions was

01:39about tariffs. And 41% of CFO said they're raising prices, passing on costs to consumers. That's

01:45inflation. Inflation is going. In that environment, as I've said to you before, the Fed can't cut

01:49rates as much as they said it would. So the takeaway is that inflation is going to get worse.

01:55Yeah, that's my opinion. It will get worse. So those hopes that the Fed is going to cut rates

01:59as soon as July are off the table now? Yeah. I mean, I think even like even Powell's press conference

02:05at the last Fed meeting, he said, we want to see more summer data to gauge the impact of inflation.

02:10That just says nothing in July. On the other hand, you have like Waller and Bowman, everyone coming out

02:16saying they should cut rates in July. I don't think that's the case. They can't cut rates.

02:19They won't have enough data points at this point to actually make that.