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Fed<\/span><\/span><\/span><\/span><\/span><\/span> policymakers, after pushing up the federal funds rate at the most aggressive pace in four decades, have reined in core CPI from a 6.3% annual rate during the third quarter 2022 to a 5.6% annual rate during the first quarter. Yet they are far short of their 2% target.<\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n \u201cInflation has been resistant to Fed efforts to drive it down, and we view the risks to our baseline forecast as tilted toward more tightening rather than easing \u2014\u00a0although, for the moment, the Fed has adopted a wait-and-see approach,\u201d Fannie Mae Chief Economist Douglas Duncan said in a statement.<\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n Traders in interest-rate futures expect the Fed\u2019s wait-and-see approach will mean it will suspend monetary tightening during its June 13-14 meeting.<\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n Investors on Friday set 84% odds that the Fed will hold the federal funds rate at a range between 5% to 5.25% next month after steadily raising it from near zero at consecutive meetings since March 2022, according to <\/span><\/span><\/span><\/span><\/span><\/span>the CME FedWatch Tool<\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/a>.<\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n Fed Chair Jerome Powell during a webcast Friday said nothing to puncture expectations of a pause.<\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n \u201cWe\u2019ve come a long way in policy tightening and the stance of policy is restrictive, and we face uncertainty about the lagged effects of our tightening so far, and about the extent of credit tightening from recent banking stresses,\u201d <\/span><\/span><\/span><\/span><\/span><\/span>he said in an interview<\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/a>.<\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n \u201cOur guidance is limited to identifying the factors we’ll be monitoring as we assess the extent to which additional policy firming may be appropriate to return inflation to 2%,\u201d Powell said, reading a statement.<\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n \u201cThat assessment will be an ongoing one as we move ahead, meeting by meeting,\u201d he said.\u00a0 \u201cHaving come this far, we can afford to look at the data and the evolving outlook to make careful assessments.\u201d<\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n Persistent gains in worker pay may prompt the central bank to sustain high borrowing costs long enough to trigger a downturn, Fannie Mae economists said.<\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n \u201cThe Fed is likely to maintain tighter policy for longer if wage-related inflationary pressures do not subside,\u201d they said.<\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n The central bank \u201cis unlikely to be convinced that inflation is under control until the labor market softens sufficiently, so we think it is probable that policy will remain tight until a contraction is under way,\u201d Fannie Mae said.<\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n<\/p><\/div>\n