My belief is the Fed has ended its current rate hike campaign and will begin cutting rates sometime this year or early next year. James B. Stewart of SmartMoney.com points out that history supports my belief:
History may also be instructive. With all this talk of a pause, I was curious to see just when the Fed last paused in a rate-raising campaign, in the sense that it stopped increasing rates for one or more meetings, and then resumed. I looked at every Fed rate decision since 1914, and guess what? The Fed has never paused in a campaign to raise rates. Sometimes it has held rates constant for several meetings, but the next move has always been a cut. Pauses aren’t unheard of — they occurred three times, in 1999, 1994 and 1988. But these all happened in periods of declining rates.
As the pop of the housing bubble trickles through the economy, expect weaker economic numbers to be revealed over the coming months. Then the current talk of a rate hike will give way to talk of a rate cut.