Pause before more hikes

So the Fed paused yesterday following 15 months of interest rate hikes. However, policymakers adjusted the language in their statement, referring to how they would determine “the extent of additional policy firming that may be appropriate,” rather than “the extent to which additional policy firming may be appropriate.” This nuance is important as the Fed clearly signals that further tightening is expected. In their now famous dot-plot summarizing where the governors summarize their forecasts, officials imply two additional quarter-point rate hikes or one half-point increase before the end of the year to a range of 5.5% to 5.75%. We conclude that the ‘normalization phase’ of economic conditions with interest rates at higher levels for longer remains the central scenario. In such an environment, our investment approach remains entirely relevant.