The Fed’s latest rate hike looks straightforward on the surface: inflation remains a problem, so policymakers are keeping pressure on the economy. There is reason to believe the FOMC remains behind the curve, as it has been since inflation reared its ugly head. But a case can be made that the committee is setting the market up for a massive rate cut. It takes some forward thinking (and a penchant for conspiracy theories), but raising interest rates amid economic headwinds could push the economy into stagnation, putting the Fed in a position to cut rates, perhaps by larger-than-normal increments, within the next few quarters. The more speculative version of the argument is that the Fed may be creating that room intentionally.
