Power Lunch

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Power Lunch

Inflation Remains Fed's Major Concern: Analysts

Julia Coronado, senior U.S. economist at Barclays Capital, told CNBC’s “Power Lunch” that she believes the Federal Reserve’s primary concern is still inflation.

She looks for a rate cut late this year or early next year.

Fed's Biggest Concern

“I think the risks to growth have eased somewhat since their last meeting,” Coronado said Tuesday. “Certainly, the business sector has returned decisively to expansionary mode. The housing sector is still the greatest source of uncertainty, but given where we are on the labor market –- it’s an extremely tight labor market –- any pickup in growth by definition means higher pressures on inflation.”

Richard Iley, senior North American economist at PNP Paribas, took a slightly different view.

“As always, I think we have to distinguish between what the Fed is going to say in public and what its true thinking is behind the scenes,” he said. “I agree that the statement this week, that the Fed’s overwhelming concern is going to be still that inflation may not continue to moderate as expected. I think behind the scenes, the Fed’s true perception of the risks facing the economy is pretty much balanced now. I think the main reason for that is, despite much brighter signs coming out of the corporate sector, the housing market continues to go from bad to worse. I think that is a very worrisome area for the Fed.”

Iley expects the Federal Reserve to tighten in September.