“The Fed Comments on Inflation and Interest Rates: Will There be a Rate Hike in June?”

Investing.com – “The latest inflation report was disappointing,” Cleveland President Loretta Mester said on Friday, commenting on consumer spending data, but that she’s still not ready to say what the US central bank should do next.

Meanwhile, Chicago Fed President Austan Goolsby declined on Sunday to say whether he would support a rate hike at the next Fed meeting on June 13-14, noting that the full impact of the Fed’s rate hike has not been fully realized. complete so far.

“The combination of inflation that is rising and consumer spending that remains very strong will increase the likelihood that the Fed will raise interest rates again in mid-June,” said Kathy Bostancic, chief economist at Nationwide Life Insurance.

“It will take a little bit more time to get them moving after a pause,” said Derek Tang, an economist at LH Meyer / Monetary Policy Analytics, which raised its forecast for peak interest rates from 5.1% to 5.6% on Friday. In June, but it increases the chance of another hike after that.. The stronger the incoming data, the more likely the next hike will be in July instead of September.”

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The Fed has more work to do

“Maybe it’s kind of unwise to pre-guess what it’s going to be,” Mester said in an interview with CNBC, when asked if another rate hike would be warranted at the FOMC meeting scheduled for June 13-14. result of the meeting. But she also said the data released on Friday confirms the Fed has more work to get inflation back to the 2% target.

“Right now, when I look at the data and when I look at what’s happening with the inflation data, I think we’re going to have to tighten,” Mester added.

“We’ve made progress; now it’s a ‘calibration’ process, and that’s what’s difficult.”

Meester was interviewed by CNBC in the wake of a data release that showed the central bank’s preferred rate measure, the Personal Consumption Expenditure Price Index, rose year-on-year instead of falling in April.

Mester warned that the Fed still needs to see more data before making its decision in June. “We have two and a half weeks ahead of us, and as I indicated, some of this data is going to be very important data,” she said.

However, when the FOMC meeting happens, Mester noted that “everything is on the table.”

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The Fed is waiting for the data

Chicago Federal Reserve President Austan Goolsby on Sunday welcomed news of an agreement to suspend the US debt ceiling, saying that failure to reach an agreement would be “extremely negative” for the financial system and the economy.

During a televised interview, Goolsby refused to disclose whether he would support raising interest rates at the next Fed meeting on June 13-14, noting that the full impact of the interest rate hike by the Reserve has not been fully realized yet.

“I am trying to establish the principle of not issuing prejudices and not making decisions while there are still weeks until the date of the meeting,” Goolsby added, explaining, “We will get a lot of important data between now and the date of the meeting.”

Goolsby said there was already “fear and uncertainty” about interest rates, which the Fed has raised by a full five percentage points since March 2022.

“The Fed’s actions could take months or even years to have an impact on the financial system,” Goolsby said, adding, “There is no doubt that inflation is still very high, and we are just trying to manage it.”

Fed officials have hinted that after just over a year of aggressive rate hikes, they could be in a place to stand on their current federal funds rate target of 5%-5.25% as they assess how their past actions will impact the economy.

However, Friday’s inflation data challenges their view that price pressures are heading back towards 2%, which in turn puts the June rate hike back on the table and may even indicate that the Fed should raise rates more over time.