“Fed Officials Split on Interest Rate Hikes: June Pause Possible”

Washington.-Federal Reserve officials were split earlier this month on whether to pause interest rate hikes at their next meeting in June, according to minutes from their May 2-3 meeting released today.

“Several (Fed policymakers) suggested that if the economy performed in line with their current outlook, then further tightening of monetary policy after this meeting may not be necessary” — a Fed term for refer to decisions on rate adjustments—the minutes noted.

At the same time, “some” officials said that continued high inflation meant that “additional (rate increases) will probably be justified at future meetings.”

However, those who supported a pause in rate hikes might have an advantage. Fed Chairman Jerome Powell and officials close to him have signaled in speeches over the past week that they would support a pause in interest rate hikes at the next meeting scheduled for mid-June.

“We think it won’t be difficult to reach consensus on a June pause if accompanied by the promise that future increases would likely be needed if the data doesn’t cooperate,” Ellen Zentner, chief US economist at Morgan Stanley, wrote in a note. investigation Note.

The Fed raises its key interest rates to increase the cost of mortgages, car loans, credit cards, and business loans. By making borrowing more expensive, the Federal Reserve tries to curb growth and inflation. Fed officials have raised their benchmark rate for 10 straight meetings, to nearly 5.1%, the highest level in 16 years.

Today’s minutes also highlighted the unusually uncertain economy that Fed officials are evaluating as they consider their next policy actions. Officials remained unsure about the severity of the failure of three large banks in the past two months, which could trigger a setback in lending.

In addition, the dispute over the federal government’s debt limit could trigger a recession if President Joe Biden and House Republicans fail to reach an agreement in early June to raise the debt limit and prevent the United States from falling. in cessation of payments.