As economic indicators continue to signal a softening in the labor market, investors eagerly anticipate the possibility of a rate cut on the horizon. Principal Asset Management Chief Global Strategist Seema Shah joins the Morning Brief to discuss her outlook on this issue.

Shah suggests that a near-term rate cut is highly unlikely, as there is currently no "clear evidence" that the economy is prepared for such a move. Despite the recent economic prints signaling a cooling trend, she notes that this being an election year, policymakers need to be "very, very convinced" before taking action on monetary policy.

"We need to see a run of weaker data on inflation and the labor market for the Fed to be comfortable enough to cut rates in September," she tells Yahoo Finance.

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This post was written by Angel Smith

Video Transcript

I'm taking a look at the CME Fed watch tool.

It seems like at their meeting next week, no change is expected, even as I'm taking a look at the probabilities for July, where we've had some economists come on and say, Hey, it's not off the table.

Well, it seems like it's more on the table that they might not do anything as that probability has moved higher for them to stay the same in July.

But then, all the focus kind of shift towards September there, what is your estimation for even as we get a trove of jobs data this week ahead of their meeting next week, what their evaluation of the employment situation will really kind of hand in terms of the the their conversation and and the tenor of their next meeting as they're trying to get back towards that 2% inflation goal?

Yeah, so it's only for us the July, um, July meeting.

I is not really on the table.

We're not anticipating a rate cut as soon as that.

By the time you get to September, they've hopefully had a number of months worth of data, which should at that point, start to show a clearer sign that, uh, this deceleration inflation has resumed and also that the labour market, whilst it's still 30 solid, that there are a few cracks and some weakening going on.

So at this point in time, each bit of data that's coming through, particularly in the labour market and on the inflation side, are extremely important.

We need to see um, a run of weaker data on inflation and the labour market for the Fed to be confident enough to cut rates in September, and we don over exaggerate this point.

But of course, making a decision to cut rates ahead of the presidential election probably means that they need to be very, very convinced they need to have very clear evidence that the economy requires those cuts.

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Uh, so if there is any kind of doubt any hotter than expected inflation data, then unfortunately, that does probably push out that likely date through to the end of the year.

If not 2025