With the markets predicting one more Fed funds interest rate hike some analysts are beginning to ask the question – has the Fed gone too far? That is has the current course of monetary tightening already put the domestic economy on path towards a meaningful slowdown?

James Hamilton at Econbrowser notes the ongoing debate. Of course, much of this is speculative, in part given the change in leadership at the Fed. Hamilton is somewhat wary that the one-two punch of higher short-term interest rates along with the demand-sapping rise in oil prices will meaningfully slow the economy. In short Hamilton believes a pause is in order,

My recommendation is that the Fed not act on the assumption that they know what the economy will be doing 6 months from now. And I believe that, if you act on that assumption, your current policy decision would be to wait for some more concrete indications before moving interest rates up any higher.

Robert Marcin, one of the few remaining must reads at RealMoney.com, thinks the Fed has already gone too far. According to Marcin a pause in policy is in order for the following reasons:

The economy is clearly tapering. The real estate bull market is very obviously history, and the energy tax is still upon consumers in a major way.

After examining the most recent GDP report and anecdotal evidence from coporate America, Marcin also believes a pause in a series of Fed rate hikes is in order,

What the Fed needs to do now is pause the rate hikes and watch the economy for a few quarters. It can easily resume in the latter half of the year if the economy has not mellowed to its liking. I mean, do these guys get paid by the rate change? If not, give investors, employees, consumers and managers a break.

The challenge, of course, is to try and predict what sort of statement the new Fed chairman wants to make in his first meeting. Given the need to establish his inflation fighting bona fides it is unlikely that his first move would be a change in Fed polcy. Time will tell.

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