Fed Could Skip June Hike But Raise Rates Later

Fed Could Skip June Hike But Raise Rates Later

Two Federal Reserve officials signaled a preference to hold interest rates steady at their June 13-14 meeting before preparing to raise them again later this summer. The policy makers said they would rather not hike rates, barring a hotter-than-expected jobs report on Friday.

• That would allow more time to consider the impact of the Fed’s previous 10 consecutive rate increases since March 2022 to fight high inflation, including its May 3 increase to a range between 5% and 5.25%, a 16-year high.
• Fed governor Philip Jefferson cautioned that holding the rate constant in June “should not be interpreted to mean that we have reached the peak rate for this cycle.” Rather, it would enable officials to consider more data before deciding on additional policy firming, he told a conference in Washington.
• Philadelphia Fed President Patrick Harker also supports holding rates steady in June, saying that if more tightening is required, “we can do that every other meeting.” Fed Chairman Jerome Powell on May 19 said: “We can afford to look at the data and the evolving outlook.”
• Futures traders began expecting another rate increase last week after strong consumer spending in April. But that view was reversed on Wednesday. The CME’s FedWatch tool now reflects a 70% probability of a June pause since Jefferson and Harker spoke.

What’s Next: Wednesday’s comments come just days before the Fed’s traditional quiet period begins. Investors see a 65% chance that the Fed would raise rates at least once by July. That would move up the median projection of the peak rate to around 5.4%, a 22-year high, The Wall Street Journal reported.

—Janet H. Cho from Barrons