Thought Hiking Rates Was Tough? Wait for the Pause

If breaking up is hard to do, explaining why you want to take a breather comes a close second. Unless confident it’s time for something new, the temptation to equivocate is considerable. In monetary affairs, figuring out what an interest-rate pause looks like — and the degree of conviction behind it — can be a perilous exercise. Calculating when to take five carries no shortage of risks.

Central banks are unlikely to be categoric when they suspend rate hikes in coming months. It may only become clear in retrospect that the hold button has been pressed. For good reason: Inflation is receding, though significantly above target. Global growth is slowing, though by less than feared a short while ago. One juicy piece of data, like a strong jobs number or prices looking a little too sticky, can sway sentiment on the future path of borrowing costs. Will it be one or two more nudges higher, perhaps even three?