A pause.

I hate to spoil the suspense, and I’m legendary for burying the lede, but if the question’s what to expect from this week’s Fed gathering, the answer’s that the Committee’s on hold.

Until when, you ask? Nobody knows, and saying “at least until March” is meaningless since that’s the next meeting after January’s.

About the best anyone can do, in terms of analysis, is venture that rates will stay where they are in the US pending additional “proof” that the disinflation process remains on track and, just as importantly, until there’s more clarity on Donald Trump’s tariffs and fiscal plan.

Some officials (Fed officials, I mean) would have you believe the disinflation process was never not on track, but I’d have to disagree. Remember, core CPI ran above the MoM pace that’s consistent with 2% annual price growth during a majority of months in 2024.

With December’s target-consistent print, the “streak” of acceptable MoM readouts now stands at — checks notes — one, and really not even that if we’re being precise about things (see the figure, above).

Fortunately, the Fed targets PCE, not CPI, and the picture looks a little better there. Data due this week will probably show underlying price growth on the Committee’s preferred measure was close enough to 0.2% to count as a second straight “good” MoM reading.

Market pricing for the 2025 Fed trajectory underwent quite a rethink in recent months. At the extremes, in early September, traders priced as many as half a dozen quarter-point cuts for this year. In the aftermath of another hot jobs report earlier this month, that pricing reflected fewer than 25bps, which is to say some traders were hedging the possibility that the Fed doesn’t cut at all in 2025.

As the figure shows, market pricing now reflects around 43bps, having reversed dovishly over the last 10 or so sessions.

Powell was at pains at the December meeting to explain that upward revisions to this year’s core PCE outlook (in the refreshed SEP) weren’t merely a referendum on the likely read-through of mass deportations and tariffs, but his protestations largely fell on deaf ears. And the December FOMC minutes, released earlier this month, did indeed suggest that “a number” of Fed officials incorporated some preliminary assumptions around tariffs into their models.

This week’s meeting won’t come with new forecasts and although the statement language will be eyed for how the Committee frames the decision to hold rates for the first time since July, the wording will be too innocuous to be tradable.

That means anyone looking to trade Wednesday’s proceedings will have to trade Powell’s presser, where reporters will try to trick him into saying something to irritate Trump. Powell will try his best not to take the bait.

The vaunted Chair will surely be asked if it’s possible we’ve seen the last cut, and also whether it’s possible the next move from the Committee might actually be a hike. In response, Powell will conjure some version of his rejoinder to the same questions when they were posed last month: “You don’t rule things completely in or out in this world, but that doesn’t appear to be a likely outcome.”