Fed may pause after inflation data

The Fed may pause interest rate hikes after data showing that inflation in the US moderated in April. The latest inflation data released in the US may create an opportunity for Fed officials to pause interest rate hikes. Annual inflation in the US was 4.9 percent in April. Inflation thus fell below 5 percent for the first time in 2 years. Core inflation, which does not include food and energy, also slowed. EY Senior Economist Gregory Deco said, “While the data suggests that there may be further tightening in monetary policy, when we look at the details, it can also be seen that it offers an opportunity for the Fed to pause interest rate hikes.” Markets predict that the tightening in credit conditions following the bankruptcy of some banks will cause an economic slowdown and that the Fed may begin to cut interest rates this year. However, the inflation figures released today show that it is still too early to declare victory. The Fed increased interest rates for the 10th time last week and raised the policy rate above 5 percent for the first time since 2007. Bloomberg Economics US Economist Anna Wong said, “Although the April data is not very convincing, it will not lead the Fed to raise interest rates in June. However, the fact that core inflation has not slowed down enough suggests that there will be no rate cut this year.” New York Fed President John Williams said at an event yesterday that there is no reason to cut interest rates this year.