Thursday morning's PCE inflation print arrived "in line" with economist estimates. However, MarketGauge.com Chief Strategist Michele Schneider cautions against seeing this as a clear sign of cooling inflation on Yahoo Finance Live.

Schneider advises not to get "too comfortable" with the notion that inflation bottomed in October. She points to the 1970s when inflation data eased repeatedly, only to reaccelerate after the "loosening of monetary policy." The Fed's higher-for-longer stance "makes sense" for now, with inflation showing signs of moderation without tanking the economy.

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Editor's note: This article was written by Angel Smith

Video Transcript

SEANA SMITH: One of our other big stories of the day, the big story of the day for the market, and that's the latest print on inflation PCE. Inflation report out this morning meeting the Street's expectations, coming in in line with the Street's expectations. Here to break it all down, we want to bring in Michele Schneider. She's marketgauge.com chief strategist.

Mich, it's great to have you. Let's talk about the reaction that we're seeing play out to this inflation print. Yes, it was in line with what the Street had been bracing themselves for. We're looking at gains here shortly after the open. How much of the inflation trend has already been priced into the market?

MICHELE SCHNEIDER: Well, that's a really good question because in terms of whether or not we can argue that actually inflation bottomed back in October when we're now starting to see upticks in CPI, PPI, the fact that PCE came in line, does that mean now that whatever little blip we had, rising in inflation is now over and it stays stayed is certainly something that I would not necessarily get too comfortable with.

Two reasons. Number one is because if we go back and look at the overlay charts, which I have shown over and over of the '70s and what's happened concurrently, is we saw all of the inflation numbers come down into '77 just like we've seen them come down from '22 to '24.

And if the predictions are correct and we start to see any kind of loosening of monetary policy as we get towards June was kind of exactly at the same time when we saw the trough in the CPI in the '70s could be the trough that we're seeing right now in PCE, CPI in the 2024 and we could start to see with any loosening that inflation numbers rise. So I'd say be happy now in terms of the inflation that it hasn't gotten out of control. But I wouldn't get too complacent still.

BRAD SMITH: How does that lean further then into the higher for longer stance that the Fed may deploy?

MICHELE SCHNEIDER: Well, you know-- and again, there's always two ways to look at things. And that's what's making the market. So fascinating right now. And in terms of the Fed, if they kept things exactly the way they were and everything stayed exactly the way it was right now, like I almost think about a holiday photograph. When you look at the family and they're all looking very, very happy and it's that moment in time, that's kind of where the Fed is at right now.

They haven't destroyed the economy like many people predicted. And they have possibly curbed inflation. So we could be at this perfect moment right here. So the higher for longer makes sense if we don't start to see more recessionary factors, which so far we've managed to avoid.

However, what will happen if we actually start to see some kind of spike in inflation down the road if Fed stays put, would that be enough because they wouldn't want to kill the economy. But at the same time, they don't probably want to raise rates unless they really start to see inflation get out of control. And that's why we're looking for specific signs why that might happen.