Several Federal Reserve presidents are set to speak on Tuesday, including Cleveland's Loretta Mester, Minneapolis' Neel Kashkari, Boston's Susan Collins, and Philadelphia's Patrick Harker. Wall Street will be listening for further Fed sentiment on interest rate cuts after Chair Jerome Powell stated they were unlikely to show up in early 2024.

Yahoo Finance Live's Seana Smith and Brad Smith discuss Wall Street's adjusted forecasts for rate cuts and what bolstered consumer confidence signals for inflation.

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

- Minneapolis Fed President Neel Kashkari penning an essay Monday writing, "The current stance of monetary policy may not be as tight as assumed given the low" unemployment or low rates of "environment before the pandemic" here, and that "more time to assess upcoming economic data" might be needed before the Fed starts to cut rates.

Tuesday's spate of Fed speak begins with Cleveland Fed President Loretta Mester set to speak today around noon followed later on by Kashkari, Collins, and Harker. And so this as we got another hot employment situation report last week, of course, with the Fed.

And the next two meetings in focus here. All eyes are really on May at this point as to whether or not we see that first rate cut.

- Yeah you're exactly right there. When you take a look at the latest gauge that we're getting here from traders, only about 10% are expecting a rate cut at the March meeting. I'm actually surprised that it is as high as 10% given what we heard from Powell last week, what we heard from him during his discussion on 60 Minutes over the weekend, and then, of course, what we're hearing from Kashkari yesterday and what we will likely hear from a number of Fed officials here later on today and for the rest of this week.

And as we-- and as traders and as investors, as economists adjust to those renewed expectations, Deutsche Bank was out with an interesting call here, reversing their recession call. They had been expecting a recession later this year. They are now no longer expecting a recession. They've also adjusted the pace of rate cuts that they expect to see from the Fed. They now expect 100 basis points of rate cuts this year, less than its earlier expectations of 175 basis points there.

They talk about cooling inflation, the fact that the labor market-- at least from their view-- is coming into better balance, therefore adjusting their recession call and no longer expecting a recession this year.

- One of the huge things that we're going to have to continue to watch as well, even if inflation is moderating closer towards the Fed's target here, you still have a consumer right now that remains resilient, more largely.

And this came in through the consumer confidence data that we saw where one of the remarks from Dana Peterson, who was the chief economist at the Conference Board, saying the increase in consumer confidence in January likely reflected slower inflation in anticipation of lower interest rates ahead and generally favorable employment conditions as companies continue to hoard labor, she said.

But when we think about what this also signals, that still signals a consumer that could get out there or has the propensity to spend if they were to see rates start to come down. Then, we get into a hairy situation of how the Fed will monitor that consumer environment, one that is having the propensity to spend, and not-- and hoping that inflation doesn't moderate or jack up higher again and spike just because you've got this pent-up demand that's still waits in the wings a little bit.

- Yeah, certainly, it is a very, very tough call here for the Fed. I don't think many people are jealous of the job that Jay Powell and his team have in front of them.

But he has done a tremendous job. When you think about the fact that he has been able to avoid the substantial deterioration in the labor, market something that many forecasters have been questioning going back here over the last 12 months.