Consumer sentiment has improved ahead of anticipated Federal Reserve interest rate cuts, with the University of Michigan's Consumer Sentiment Index for September registering a reading of 69.0. BMO Wealth Management US Chief Investment Officer Yung-Yu Ma joins Catalysts to share his outlook on monetary policy in light of this report.

Ma contributes the rise in consumer sentiment to a "relatively stable job market" and ongoing disinflationary trends. Regarding the Fed's next move, he believes the central bank is likely "leaning toward a 25-basis-point cut," although he argues that a 50-basis-point reduction would be "justified" given cooling inflation and a softening labor market.

"We do think the Fed is a little bit behind the curve here," Ma tells Yahoo Finance, suggesting that the Fed has been overly focused on backward-looking data rather than forward-looking indicators. He predicts continued rate cuts throughout the rest of 2024 and into 2025, emphasizing that "the trajectory is ultimately what's most important."

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This post was written by Angel Smith