The Federal Reserve is divided over whether or not to raise interest rates at its next meeting in June.[0] Some members of the Federal Open Market Committee (FOMC) are advocating for another hike to ensure that inflation remains subdued, while others are open to holding the rate steady to assess whether the previous hikes have been sufficient.[1] With the decision shaping up to be a close call, Fed Chair Jerome Powell suggested that the current banking stress could mean that rates may not need to rise as high as previously anticipated to slow the economy.[2] Powell emphasized that price stability is the foundation of a strong economy and that the Fed is strongly committed to returning inflation to its 2% goal.[3] However, the disruption to the financial sector from a series of bank runs in recent months could impact the central bank’s policy decisions.[4] Other Fed officials, like Dallas Fed President Lorie Logan, have said that the current data doesn’t yet support a pause at the June meeting.[5] Traders are currently pricing in a 22.4% chance of a quarter-point rate hike in June, down from 35.6% a day ago, after talks on the debt ceiling reportedly stalled on Friday.[6]
0. “Fed Officials Debate Whether to Pause Rate Rises” The Wall Street Journal, 17 May. 2023, https://www.wsj.com/articles/fed-officials-debate-whether-to-pause-rate-rises-8d24e79c
1. “Fed Officials Split On Whether To Raise Interest Rates Even Higher” Investopedia, 19 May. 2023, https://www.investopedia.com/fed-split-on-eleventh-rate-hike-7500462
2. “Fed Chair Powell says rates may not have to rise as much as expected to curb inflation” CNBC, 19 May. 2023, https://www.cnbc.com/2023/05/19/fed-chair-powell-says-rates-may-not-have-to-rise-as-much-as-expected-to-curb-inflation.html
3. “Fed’s Powell: Strongly commited to return inflation to 2% goal” FXStreet, 19 May. 2023, https://www.fxstreet.com/news/feds-powell-strongly-commited-to-return-inflation-to-2-goal-202305191515
4. “Powell signals Fed may take its foot off the gas on rate hikes following banking turmoil” Fox Business, 19 May. 2023, https://www.foxbusiness.com/economy/powell-signals-fed-take-foot-gas-rate-hikes-banking-turmoil
5. “FOMC remains ‘strongly committed’ to bringing inflation to 2%, Jerome Powell says” Seeking Alpha, 19 May. 2023, https://seekingalpha.com/news/3973500-fomc-remains-strongly-committed-to-bringing-inflation-to-2-jerome-powell-says
6. “Likelihood of June Fed interest-rate hike drops to 22.4% as debt-ceiling talks seen stalling” MarketWatch, 19 May. 2023, https://www.marketwatch.com/story/likelihood-of-june-fed-interest-rate-hike-drops-to-22-4-as-debt-ceiling-talks-seen-stalling-87f715c7