The recent volatility in financial markets will not stop the Fed raising rates at its meeting next week. A bigger concern for the Fed is the renewed weakness in core inflation, which may prompt some officials to revise their interest rate projections lower. On balance, we still expect the Fed to continue raising rates once a quarter, until a slowdown in economic growth to below potential prompts an end to the tightening cycle in mid-2019. But if core inflation were to weaken further in the coming months, we suspect the Fed would stop raising rates even sooner.
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