US FOMC Inflation Pass-Through Key To Fed Funds Path

ANZ Research anticipates an extended Fed pause, as the FOMC monitors whether relative price shocks like energy and tariffs lead to persistent inflationary pass-through. The Fed's policy path remains data-dependent with a focus on core inflation metrics.

Key Takeaways

• 1.The FOMC's reaction function has hardened under Chair Warsh, prioritizing the return of inflation to target.
• 2.The degree of inflation pass-through from relative price shocks (like energy/tariffs) to broader consumer prices is the critical determinant for future rate paths.
• 3.Baseline view is an extended pause into mid-2027, followed by a gradual 50bp easing cycle.

Table of Contents

• US FOMC: inflation pass-through key to fed funds path
• Inflation expectations and wages
• Baseline assessment

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