The Fed hiked rates by 25bps on Wednesday, as expected. The decision was unanimous.

Contrary to what you might’ve been inclined to believe if you get your information from social media or take your cues from various “brand names” whose never-ending quest to stay relevant entails being wittingly co-opted into an echo chamber of idiocy, no other outcome was on the table for this meeting.

In the hours leading up to the decision, finance-focused social media was an asinine cacophony of speculation that the Committee might blindside markets with a 50bps move. This affords me another opportunity to remind my younger readers that such banter typically has no basis in reality whatsoever.

Officials spent weeks telegraphing the step down to quarter-point moves. The deceleration began at December’s meeting when, in a likewise foregone conclusion, policymakers downshifted to a half-point increase from the 75bps cadence adopted in June, when inflation threatened to spiral out of control. Wednesday’s hike brought the cycle total to 450bps.

The statement language around inflation was shortened. “Inflation has eased somewhat but remains elevated,” the Fed said. They retained the guidance around rates: “The Committee anticipates that ongoing increases in the target range will be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2% over time.” That’ll probably be interpreted hawkishly by markets — it appeared to slam the door on a March pause, and I’d note that “ongoing” presumably means more than one additional hike. So, 25bps in March and another 25bps in May which is consistent with most Street forecasts, if not market pricing, which had March at ~80% headed in and May at 47%.

Although a few officials may be comfortable with a pause next month, the Fed has by and large been reluctant to abandon aspirations to a 5% terminal rate. They’ve been outright hostile to the rate cuts priced into the back half of 2023 by traders. The tension between those placeholder rate cuts and officials’ insistence that wherever terminal is, the Fed intends to hold it at least through year-end, is the subject of vociferous debate.

February’s reversion to “regular”-sized increments was consistent with persuasive evidence that inflation has peaked for now. Note the emphasis. I’m not ruling out a re-acceleration down the road, and I’ve been very vocal about the risk that inflation proves to be a semblance of stochastic going forward, particularly given the distinct possibility that the macro regime which anchored consumer prices in the developed world for three decades is lost forever.

At the same time, the latest JOLTS figures underscored the persistence of labor market distortions which have driven wage growth to levels inconsistent with the Fed’s inflation target. Compensation data released earlier this week was cooler than expected, but nevertheless suggested pay growth was too hot for policymakers’ liking in Q4, even as it failed to keep pace with inflation. That’s a maddening dynamic for Main Street, where workers are effectively being asked to stop insisting on higher pay because those wage demands are the proximate cause of the inflation that’s eroding their existing paychecks.

For the time being, though, the Fed is probably satisfied that between the level of rates (particularly if you pencil in another 25bps for March, to say nothing of May), ongoing goods deflation, pipeline shelter disinflation and evidence of a slowdown both in investment and consumption, consumer price growth in the US will meander lower in the coming months. The new statement described spending and production growth as “modest.”

“The Committee is highly attentive to inflation risks,” the February statement reiterated.