Kaiyuan Macro: Rising inflation expectations cause the Federal Reserve to pause further easing

The median expectation for annual inflation in the United States has risen to its highest level since November 2023, wrote Ruben Gagalac Abegs, assistant economist at Capital Economics. "This adds another reason for the Federal Reserve to remain cautious and pause the easing cycle for a while." Higher inflation expectations are not the only inflation headwind currently faced by the Fed. Wage growth in January continued to exceed expectations, which could push up inflation in the service sector. Economists expect that Fed officials will keep interest rates unchanged at their policy meeting on March 18-19, and may even extend the pause in rate cuts until their June meeting.