Some analysts see next week’s meeting of the Federal Open Market Committee (FOMC) as an opportune time for the Fed to pause in raising interest rates, according to a CBS MarketWatch report.
“I could easily build a case for pausing,” said Paul Kasriel, economist at Northern Trust Co. in Chicago.
Kasriel said the yield curve, the year-over-year percent change in money supply, and the index of leading economic indicators are all signaling a slowdown in economic activity.
Kasriel is one of a small number of Fed watchers who believe it would be appropriate for the Fed to take a break from their path of steady quarter-point rate hikes.
But the majority of economists expect the Fed to hike rates by a quarter percentage point to 4.75%, the 15th straight meeting with a quarter-point move. The financial markets have priced in two more quarter-point rate hikes on March 28 and May 10 before the Fed pauses at 5%.
“That’s the rule. Whatever they did last, they’ll do two more times,” Kasriel said. “It is pretty good, until you get to the turning point.”
Senior Fed officials have said their decisions on interest rates are “data-dependent” or based on fresh reports on inflation and growth.
But the economic data released since the last Fed meeting on Jan. 31 has not shed much light on the economic outlook.
That’s because growth in the January through March quarter, expected to be pretty good, was boosted by the unwinding of factors that depressed growth in the fourth quarter.
So, the key data are the reports on the second quarter that begins April 1. Pausing until May 10 would give Fed officials a look at the March and April unemployment reports, auto sales and ISM factory data.
CBS MarketWatch said another good reason to pause is that it is too soon to get a good gauge on the housing sector, perhaps the biggest economic variable this year. Realtors say a more accurate reading could be made when the FOMC meets on May 10, when some of the spring data will start filtering out.