Fed Points Toward a Pause in May Once Hikes Have Time to Sink In

 

That’s based on a timeline sketched out by one of the Fed’s most closely watched hawks, Governor Christopher Waller, who was an early advocate of the Fed’s front-loading rate-hike strategy last year.

 

Policymakers are widely expected to raise rates by a quarter percentage point at the conclusion of a two-day gathering Wednesday, to a range of 4.5% to 4.75%, slowing from December’s 50-basis-point increase after four straight 75-basis-point moves.

 

Fed officials projected in December that they would pause when rates move above 5%, but Wall Street traders bet they will halt slightly below that level.

 

US central bankers have said that October, November and December inflation data, which all showed steady declines in price increases, was welcome news but they still needed to see more.

 

The core personal consumption expenditures index rose 2.2% in the three months through December on an annualized basis, and 3.7% over the past six months, a slowdown from its 4.4% pace in the last 12 months, a report Friday showed. 

 

Vice Chair Lael Brainard, speaking a day before Waller, also pointed to declines in three- and six-month measures of inflation.

 

Should these trends continue for three more months, per Waller’s benchmark, policymakers could have seen enough to be confident of pausing by their May 2-3 meeting, when they will have data for January, February and March in hand.

 

(Source: Bloomberg)