The Federal Open Market Committee today announced nothing of substance. Its Fed funds target rate remains 5.25%%-5.50%. The balance sheet rolloff continues apace.
The media are rife with speculation that this rate hiking cycle is done. That may be, but the Fed hasn’t told us so. Nor is it likely to even when it is, for two reasons. First because it won’t even know itself until well after the fact, and second because it probably wouldn’t tell us even if it did know, because it doesn’t want the asset markets shooting higher on speculation as to when it will begin cutting. That would represent another inflationary impulse, which could then actually make further tightening necessary which might otherwise not be.
We don’t know how this will play out, but the scenario most popular with the financial media is among the least likely … that inflation will gradually subside and come in for a smooth landing in the Fed’s target range without notable disturbance to the financial markets.