Economics
As Fed Nears End of the Hiking Cycle, It Faces a Hard Reality
- Is patience pointing to a pause or a peak? It isn’t clear.
- Regardless, the Fed will have less room to cut come next slump
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The Federal Reserve’s recent turn toward patience on further rate hikes underlines an unfortunate reality: the central bank will have way less ammunition to fight the next recession than it had in the past.
“The apparent change in monetary policy strategy led some observers to ask whether the Fed is overreacting to recent market volatility,” Tiffany Wilding at Pacific Investment Management Co. LLC wrote in a blog post. “Many Fed officials now see a good chance that the current range of the fed funds rate (2.25 percent to 2.5 percent) is the terminal level of this cycle -- a level notably lower than most of them had previously expected.”