In a Wall Street Journal article, Nick Timiraos says that until now the Fed has been looking for clear signs of a slowdown in easing inflation to justify a pause. However after this week the calculations could flip. That is officials could need to see signs of stronger-than-expected demand and inflation to keep hiking.
A summary of the article says:
- The Federal Reserve is expected to raise interest rates again at their meeting this week, marking the fastest rate-raising cycle in 40 years.
- Officials believe that they are closer to the end of this tightening journey but will continue to debate the appropriate next steps.
- A quarter-percentage point increase would bring the benchmark federal-funds rate to a 16-year high.
- The Fed began raising rates from near zero in March 2022.
- Some officials are cautious about the potential impact of tightening credit conditions and would prefer to suspend rate increases.
- Others are more concerned about the risk of taking the foot off the brake too soon, leading to inflation, hiring, and economic growth exceeding forecasts.
- The policy statement released after the meeting will be crucial in understanding the Fed's stance on interest rates.
- Officials are also monitoring the effects of recent bank deals and mergers, as well as the potential fallout from midsize bank failures in March.
- They will be cautious about the possibility of unanticipated financial stresses emerging before their meeting.