In the face of market pressure to hold off on any move, some policymakers may argue to keep up the more moderate pace of increases adopted in February.
Lorie Logan, the Dallas Fed president who previously ran the markets division at the New York Fed — making her the most market-savvy of top Fed officials — has consistently argued for a more measured approach to rate hikes, following last year’s quick ramp up.
Futures suggest the immediate debate is whether to move at all, and reflect bets on rate cuts later in the year. Goldman Sachs now predicts the Fed will stand pat next week, and Barclays economists said “we lean toward” that call. Mr Powell told Congress last week that policymakers would be prepared to move rates to a higher peak and at a faster pace to cool prices, despite downshifting to a quarter-point increase in February.
The central bank also has had a number of more recent pivots. It was forced to change tack in late 2021 when the inflation it had called “transitory” turned out to be much sticker than policymakers and economists initially predicted.Criticism is now emerging that Mr Powell’s message last week was ill-suited to the risks building in the financial system.
“These events will impart more caution, but must be balanced against the newly worsening inflation picture,” economists at LH Meyer/Monetary Policy Analytics wrote in a note to clients. “While the chance of the March hike being 50 basis points has fallen significantly, we believe that the Committee will still end up hiking.”
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