Consumer inflation may have cooled off a little in February, but economists expect it is still running at a high pace.
Just a few days ago, a hot inflation report would have increased expectations that the Federal Reserve could boost the size of its next interest rate hike to 50 basis points from the quarter point it implemented in February. But now, with markets more worried about bank failures and contagion, there's a group of economists who doubt the Fed will even stick with a quarter point hike when it meets March 21 and 22. A basis point equals 0.01 of a percentage point.
"I think if it's stronger than expected, it would be looked at as a little stale," he said. "From the perspective, if there's downside risks to the economy from the potential fallout of what's going on in financial markets, it will be considered old news. If it's softer, it could embolden the idea the Fed may be pausing."
Tom Simons, money market economist at Jefferies, expects the Fed to stick with a quarter-point rate hike in March. Simons said because of the uncertainty, markets will focus on just one Fed meeting at a time. The next meeting after March 21 and 22 will be in May. "May will be May's business. A lot will happen between now and then that will help us see through things a little better," said Simons.
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