Smaller Fed rate hike may augur end to 'ongoing' increases

By Howard Schneider WASHINGTON (Reuters) - The Federal Reserve is set to again slow the pace of its interest rate increases at a Jan. 31-Feb. 1 policy meeting while

also signaling that its battle against inflation is far from over. Economic data since the U.S. central bank's last meeting in December have showed inflation continuing to

wane, with consumer and producer prices, profits, and wages all growing more slowly, and major inflation drivers like rent hardwired to move down. Policymakers have reacted,

with more of them saying they are ready to raise rates by only a quarter of a percentage point at the upcoming meeting, a back-to-normal approach after a year in which the target

policy rate was ratcheted up by 4.25 percentage points, with the bulk coming in 75-basis-point increments. It was the fastest tightening of monetary policy since the 1980s.

The Fed scaled back the pace in December to a half-percentage-point increase as a way to acknowledge that the main force of its credit tightening was yet to be felt in job markets

and among consumers, and to more cautiously feel the way to an eventual stopping point. Graphic: Rates and inflation Fed Vice Chair Lael Brainard said on Thursday that "logic" still applied as the central bank

"probed" how much further to raise rates in an environment where inflation appears set to slow and the economy may be weakening.