Markets are seemingly rejoicing after the Federal Reserve motioned to hold interest rates on Wednesday. Could future inflation readings bring the stock market to sing a different tune in the coming months?

MacroPolicy Perspectives Founder and President Julia Coronado joins Yahoo Finance Live to comment on the trajectory of future inflation data.

"One of the key changes in the landscape over the last year that has facilitated inflation taking a pretty big step down is that consumers are price sensitive again. So we have to be careful about translating change in input costs for producers into costs for consumers," Coronado says.

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 Luke Carberry Mogan.

Video Transcript

JOSH LIPTON: Julia, it's interesting just to see how investors are reacting. Yesterday, big up day were higher again today. Do you think Julia, we might want to take a deep breath here though. I mean, aren't there-- there's some risk that looking ahead, we get more of those firmer than expected inflation prints?

JULIA CORONADO: That's always possible. I don't-- one of the key changes in the landscape over the last year that has facilitated inflation taking a pretty big step down is that consumers are price sensitive again. So we have to be careful of about translating every change in input costs for producers into costs for consumers. Before the pandemic, we did not see that. Firms did not have a ton of pricing power.

Then during the pandemic, price sensitivity melted away, consumers were awash in stimulus. And they could only spend on a few things. So firms enjoyed some pricing power that has melted away again, we hear that in earnings report after earnings report, it has helped restore lower inflation. It means that firms are looking more towards efficiency gains and cost cutting to maintain or enhance margins.

So I don't think we're back in that environment where every wiggle of input costs gets priced through to the consumer and to broader inflation. I am not particularly worried about that. And I don't think it sounds like the Fed isn't quite as worried about that as they were last year. When they were getting all this good news on inflation, they were deeply skeptical. It continued, you had a little bit of a setback at the beginning of the year.

But less than last year. So annual rates of inflation keep moving down. So it's interesting times because there's a wide range of views in the market amongst our clients. There's just tremendous range of views between people that are sanguine on inflation like ourselves and those who do think that there's another upsurge around the corner and that the Fed's about, people think the Fed's going to make a mistake in one direction or another. And we actually think that they're balancing the risks reasonably well.