The Federal Reserve describes its policy as removing "a dose of accommodation," not making conditions restrictive. This analogy of easing off the accelerator, rather than braking, suggests the central bank believes the economy can withstand further rate hikes, making them more probable.
The Fed is not convinced by individual data points showing inflation might be cooling. Instead, Chair Warsh emphasized that trends matter more, and with too many categories still above 3%, the overall trend remains too high. This signals a higher bar for pausing rate hikes than the market might expect.
The Fed raised its estimate of the long-run 'neutral' interest rate—the rate that balances the economy. This technical shift means current interest rates are now considered less restrictive than previously thought, providing an underlying justification for the Fed to pursue more rate increases to achieve its desired cooling effect.