Russell Investments senior strategist BeiChen Lin says the Fed is likely to
pause rate hikes at the October meeting but to resume tightening in December.
Lin cautions that upside inflation surprises remain the main risk:
higher-than-expected inflation could force markets to reprice the probability of
an October hike and the terminal fed funds rate. Russell adds that current
inflation dynamics differ materially from 2022 — many drivers that pushed
inflation then are no longer present — which should cap upside inflation and
limit how high the fed funds rate ultimately needs to go. Near-term inflation
prints may still affect policy timing, but the case for a materially higher
terminal rate has likely weakened as prior inflation drivers fade.
