How patient will the Fed be?

With financial markets rebounding this week and the incoming domestic activity data relatively strong, we still expect the “patient” Fed to raise interest rates this year. But core PCE inflation looks set to remain stable at just below the Fed’s 2% target, so we suspect policymakers would not hesitate to end the tightening cycle if the data pointed to a sharp slowdown, which we expect to happen in the second half of this year.