‘A policy mistake wrapped in a communication error’: The Fed’s hawkish pause

Plus, the US May CPI and Australia’s Q2 CPI; globalisation and low inflation; and Where’s the recession? Not where you thought

‘A policy mistake wrapped in a communication error’ was how Vince Reinhart characterised last week’s Fed decision to ‘skip’ a further increase in the Fed funds rate target, the first such pause in 15 months. It was a move very reminiscent of the RBA’s April pause, which was followed by two rate hikes in May and June. As with the RBA’s April meeting, FOMC members made the case for further tightening, so the pause this month is difficult to rationalise and explain. Even the verb ‘skip’ implies more to come.