We expected the Federal Open Market Committee (FOMC) would pause its pattern of quarterly rate hikes at some point this year. While we acknowledged it would come sooner rather than later the question of exactly when was answered unequivocally last week with the Committee’s first meeting and Statement of the year. Along with keeping rates on hold, the Committee dropped its forward guidance and ushered in a new word into its policy guidance: patience.
So the Fed is now officially “on hold” but that doesn’t necessarily mean the rate hiking cycle is over. The outlook for monetary policy is now more firmly in the hands of the data and it’s the labour market that carries most weight in the outlook for inflation …