Financial markets are convinced that the Federal Reserve will “skip” an interest rate hike at its June meeting and focus its attention on raising rates again in July.
But not all economists agree. Some are anticipating a 25-basis-point hike in the Fed’s policy interest rate next week, which would bring the benchmark rate up to a range of 5.25%-5.5% and mark the 11th straight meeting with a hike. Jonathan Millar, senior U.S. economist at Barclays, agreed that there was “real tension between the data we’ve gotten since the May meeting and the idea that the Fed would be comfortable pausing.”
The sentiment that the Fed would skip another rate rise in June arose after two officials, Fed Gov. Philip Jefferson and Philadelphia Fed President Patrick Harker, mentioned the possibility in back-to-back speeches on May 31. Complicating the outlook at this meeting is that the Labor Department will release May consumer price inflation data on June 13, right as the Fed meeting is starting.
“If they were to surprise the markets right now, that would compound the regional banking stress” and make the Fed’s job much harder, he said in an interview.