The debate continues as to when the Federal Reserve will cut interest rates, breaking their higher for longer stance. Many experts believe three cuts will come within the year based on the Fed's dot plot released in March, but with hotter-than-expected inflation data rolling in, others think the chart may already be outdated.

Former Fed Vice Chair Alan Blinder joins Market Domination Overtime to discuss the Fed's decision making in its monetary policy and its larger affect on markets overall.

Blinder, currently a Princeton University Professor of Economics and Public Affairs, comments on the timing of rate cuts: "I've been saying, rightly or wrongly, for a long time, something like, middle of this year. And I still feel that way. There have been ups and downs. There have been periods where it seemed like it might be closer, periods when it might be more distant than we thought. I am still fairly comfortable with thinking the first cut comes in June. Give or take."

He continues by affirming: "The truth is, [Fed Chair] Jay Powell right now, today, doesn't know when it's going to come. "

For more expert insight and the latest market action, click here to watch this full episode of Market Domination Overtime.

Editor's note: This article was written by Nicholas Jacobino

Video Transcript

Fed President Loretta Mester and Mary Daly both speaking out, saying they still expect three rate cuts this year. But they may need to see more data.

Joining us now is Alan Blinder, Former Fed Vice Chair and Princeton University Professor of Economics and Public Affairs. Thank you so much. It's great to see you, Alan.

ALAN BLINDER: Great. Thanks.

JULIE HYMAN: There's a lot of back and forth. There is a lot of as there always is in scrutinizing one could argue. Over scrutinizing the data that we get on a daily basis.

But as somebody who was inside the Fed, what do you make of the decision process that we are witnessing right now?

I think maybe the first thing a lot of your viewers should realize is the Fed does not get nearly as excited over the daily data stream. There are numbers coming out every day. Some of them look good. The market gets excited.

Some of them look bad. The market gets depressed. Divide that by 100 for how the decision makers on the Fed feel about it. Same direction, but much, much smaller.

JOSH LIPTON: So, Alan, I'm just curious. When you look at 2024, when do you expect the Fed to start cutting?

ALAN BLINDER: Well, I've been saying somebody gave me credit for this on TV a long time ago. But I've been saying rightly or wrongly for a long time something like middle of this year. And I still feel that way.

There have been ups and downs. There have been periods where it seemed like it might be closer, periods when it might be more distant than we thought. I'm still fairly comfortable with thinking the first cut comes in June give or take.

Now, when I say that, what I bet a lot of money on that? No, I mean, I don't know when it's going to come. Look, truth is Jay Powell right now today doesn't know when it's going to come.

JULIE HYMAN: Right. Yes. As he says, he's data dependent. And even though some investors have their own opinions about that. We take him at his word. So do you then think that we are not going to see a meaningful re-acceleration in inflation that maybe some of the data from January and February hinted at?

ALAN BLINDER: Yes. And the keyword in your sentence was "meaningful." That doesn't mean there won't be some upward blips as there just was. But I think I don't see anything in the data to strongly contradict the view that inflation is trailing down slowly. Maybe not surely because there will be some ups and downs on the way.

But down, not up. And if it keeps trailing down, it's not going to be too long before. It's right around where the Fed wants it to be, 2%.

People need to remember among other things that when you look at CPI as your screen just showed, you want to add about a half a percentage point to make an equivalent to what the Fed is looking at, the PCE index. So the target, so to speak, translated to CPI is about 2.5%. We're not very far from that.