On May 11, “Fed microphone” Nick Timiraos wrote that Fed officials were already inclined to suspend interest rate hikes in the summer before the April CPI data was released to see whether they had done enough to slow down the economy and inflation.
That was made easier by yesterday’s US inflation report, which showed that price pressures have not worsened and may soon follow suit as moderation in rental housing costs begins to feed through to inflation measures.
What’s more, Fed officials need time to observe the impact of the recent strain on the banking system.
To be sure, inflation isn’t showing a convincing slowdown, but Powell said six months ago that officials didn’t necessarily see a slowdown in just a string of inflation numbers as a prerequisite for the Fed to pause rate hikes.