The rate hike path and subsequent pause are consistent with the Fed's communication policy. Already, the Bank of Canada raised rates by a quarter-point last week and signaled a conditional pause in order to assess the lagged effects of past rate hikes. Expectations of falling rates later this year are contrary to the Fed's forward guidance. I am struck by a key sentence from the December FOMC minutes: "No participants anticipated that it would be appropriate to begin reducing the federal funds rate target in 2023,"
While there will be no dot plot published at the conclusion of the February FOMC meeting, the Fed's intentions can't be any clearer. There will be no cuts this year. In that case, what are the circumstances that could alter the Fed Funds trajectory?
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