Fed Walks Inflation Tightrope While Economy Shows Resilience
• Inflation is slowing but may remain sticky due to stubborn pockets; the Fed wants clear proof of taming before rate cuts.
• Consumer spending has shown resilience despite high interest rates; however, sentiment surveys swayed by stocks may show "irrational exuberance."
• Economic growth is strong but risks overheating and reigniting inflation, which could force the Fed to induce a recession.
• The Fed is in a tight spot regarding rate cuts due to solid labor market and consumer strength; wants inflation proof before easing.
• Corporate earnings boosted by tech stocks and AI hopes, but broad earnings growth faces economic and rate challenges.