The Fed just edged a step closer to recognizing a major policy misstep

BusinessInsider/Pedro Nicolaci da Costa/07-15-17

The Federal Reserve is embarking on an annual summer ritual: Downgrading its overly optimistic forecasts for economic growth and, potentially, preparing for a pause in interest rate increases.

Wall Street rallied after Fed Chairwoman Janet Yellen’s testimony to Congress this week as she seemed to open the door for such a pause, by acknowledging that a recent decline in inflation further below the central bank’s 2% target may not, in fact, be as fleeting as policymakers had hoped.

…Fed policymakers “have a pause built into their baseline estimates and it seems the inflation data present a reason to exercise that pause option in September,” according to Julia Coronado, president and founder of MacroPolicy Perspectives.

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