Thursday, May 24, 2018

Another Rate Hike Seems Likely

Federal Reserve officials in their meeting in early May confirmed they planned to raise interest rates in June and were not concerned they were behind the curve on inflation. That was the primary takeaway from that meeting, whose minutes were released to the public yesterday afternoon.

“Most participants judged that if incoming information broadly confirmed their economic outlook, it would likely soon be appropriate for the FOMC to take another step in removing policy accommodation,” the minutes said. Traders in the federal funds futures market see more than a 90 percent chance of a June rate hike.

Although inflation hit the Fed’s 2 percent target in the latest reading for March, for the first time in a year, officials were not convinced it would remain there for long. “It was noted that it was premature to conclude that inflation would remain at levels around 2 percent, especially after several years in which inflation had persistently run below the Fed’s 2 percent objective,” the minutes said. Only a “few” officials thought inflation might move “slightly” above the 2 percent target.

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