A hawkish pause at the Fed

The Federal Open Market Committee (FOMC or Fed) left its key policy rate unchanged today, but the bigger news was its signal that it is likely to raise the policy rate another 0.5 percentage point by the end of 2023. Markets were surprised; stock and bond prices fell on the news but retraced most of these losses later in the afternoon.
The Fed's signal is an appropriate reaction to recent data showing that the economy has barely begun to cool off and that inflation is persisting at a higher rate than the Fed and most private forecasters had expected. Indeed, there is a good chance that the…