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Waiting for the Pause...

Greg Ip waits for the "pause"... and waits and waits and waits...

Greg Ip: Fed Reality Check: Fed pause coming and this time, we mean it -- right?

Did Bernanke hint at a pause in rate increases in his Congressional testimony this week? The markets certainly think so, but a reality check might be in order. We checked our coverage of the last seven months and concluded that since the Fed started hinting of a pause, it's raised rates four times. Here are The Wall Street Journal's headlines in that period:

  • Dec. 14: Neutral Point May Be Near As Statement Leaves Room for a Pause in the Increases
  • Jan. 4: Fed Suggests It's Close to Ending Run of Rate Rises
  • Feb. 1: Fed Lifts Rate by Quarter Point, Casts Doubt on More Increases
  • April 19: Fed Hints Next Rate Increase Could Be the Last for a While
  • April 28: Bernanke Hints at a Pause in Rate Increases
  • May 11: Central Bank Cites Worries Of Inflation Amid Growth, But Hints of a Possible Pause
  • July 20: Dow Surges as Markets Take Fed Chief%u2019s Remarks as Hint Rate Increases Are Near End

To be sure, those were just hints -- the Fed never said when, or whether, it would pause, and some of those hints clearly applied to a period beyond the next meeting. That said, the fact there has been no break in the tightening cycle in spite of all the hints to the contrary serves as a useful ...

I think that the economy is soft enough and that there is enough contractionary pressure still in the pipeline that hasn't affected the economy yet. So I'm surprised that there hasn't been a pause yet. I suspect that the Fed is scared of the "soft on inflation" headlines that a pause would generate, and so finds itself simply putting one foot in front of the other.