Inflation is 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, whether it's up a little bit or a lot of it.

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

00:26worried me more, whereas personal income and personal spending actually deteriorated. And

00:31that suggests that there's more pressure on the economy. And what you and 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

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

00:48in order to fight off inflation. But the inflation number was stronger than expected, and we've

00:52been saying this. The one thing you and I talked about before is that tariffs are deflationary

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

01:02put pressure on economically sensitive commodities like energy, oil, like copper. So it's always

01:09deflationary at first. We're going to start seeing the numbers in July. I definitely believe

01:13we will. And you're already seeing inflation numbers pick up in PMIs and flash readings from

01:20manufacturing. Like even earlier this week, we saw PMI prices came in well above expectations,

01:26and 70% of companies said they are raising prices, pushing them out to consumers. And

01:31as another note, CFO study came out yesterday, two days ago from the Fed. And if you read between

01:36the data, one of the Fed's special questions was about tariffs. And 41% of CFO said they're

01:42raising prices, passing on costs to consumers. That's inflation. Inflation is going. In that environment,

01:47as I've said to you before, the Fed can't cut rates as much as they said it would.

01:51So the takeaway is that inflation is going to get worse.

01:55Yeah, that's my opinion. It will get worse.

01:56So those hopes that the Fed is going to cut rates as soon as July are off the table now?

02:02Yeah. I mean, I think even like even Powell's press conference at the last Fed meeting,

02:06he said, we want to see more summer data to gauge the impact of inflation. That just says nothing in

02:12July. On the other hand, you have like Waller and Bowman, everyone coming out and saying

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

02:20won't have enough data points at this point to actually make that.