A June skip jumps to the fore following latest Fed comments
Adds details, paragraph 8-11
By Howard Schneider and Ann Saphir
WASHINGTON, May 31 (Reuters) -Federal Reserve officials including the vice chair-designate pointed towards a rate hike "skip" in June, prompting a quick reversal of market expectations for another hike as the U.S. central bank weighed the value of caution against still strong inflation data.
In what some viewed as a message from the Fed's leadership, Fed Governor and vice chair nominee Philip Jefferson said any decision to hold rates steady should not be viewed as the end of the tightening cycle.
"Skipping a rate hike at a coming meeting would allow the (Federal Open Market) Committee to see more data before making decisions about the extent of additional policy firming," Jefferson said at a financial stability conference in Washington.
Leaning toward what some have called a "hawkish pause," with rates held steady for now but the door left open for further increases, Jefferson said that "a decision to hold our policy rate constant at a coming meeting should not be interpreted to mean that we have reached the peak rate for this cycle."
Though Jefferson's nomination as vice chair is still pending in the U.S. Senate, his remarks were taken as a cue, just two days before the start of a blackout period that prohibits further public comment about the June 13-14 policy meeting.
"We are as certain as we can be that this message would have been agreed with chair (Jerome) Powell beforehand and represents the collective Fed leadership view," said Evercore ISI vice chairman Krishna Guha, who called it "an authoritative signal that the Fed leadership is not intending to raise rates in June."
Since the Fed's last meeting and with inflation showing little recent improvement towards the Fed's 2% target, markets have been on a seesaw trying to determine if the Fed is going to raise its policy rate in June or not. After Jefferson spoke investors reset expectations yet again, with prices of futures tied to the Fed's policy rate reflecting a less than one in three chance of a June rate hike compared with about a two-in-three probability before his remarks.
Philadelphia Fed President Patrick Harker added to the case.
"I am in the camp increasingly coming into this meeting thinking that we really should skip," Harker said, though data due on Friday about the U.S. job market "may change my mind."
The rate hike "skip" has now become jargon for an emerging compromise between concerns inflation is not yet controlled with fears the economy may slow sharply as banks pull back on credit.
The Fed's main measure of inflation did accelerate in April and remains more than twice the central bank's target, data that has prompted some officials to say rates need to continue higher.
"I don't really see a compelling reason to pause," Cleveland Fed president Loretta Mester said in an interview published Wednesday in the Financial Times.
Fed Governor Michelle Bowman, meanwhile, said that some of the factors the Fed has hoped would lower inflation, such as a weakened housing market, may have provided less help than expected given what may be the beginnings of a housing rebound.
Jefferson acknowledged inflation remains "too high" and that "by some measures progress has been decelerating recently."
But he also said he expected the economy would remain sluggish for the rest of the year as households spend down savings built up during the COVID-19 pandemic, and credit gets scarcer and more expensive.
"I expect spending and economic growth to remain quite slow over the rest of 2023," he said. While Jefferson does not expect a recession, he noted that there are reasons to be careful after 15 months in which the policy rate was raised by 5 percentage points.
"History shows that monetary policy works with long and variable lags, and that a year is not a long enough period for demand to feel the full effect," he said.
Reporting by Howard Schneider; Editing by Paul Simao, Nick Zieminski and Daniel Wallis
Pinakabagong Balita
Disclaimer: Ang mga kabilang sa XM Group ay nagbibigay lang ng serbisyo sa pagpapatupad at pag-access sa aming Online Trading Facility, kung saan pinapahintulutan nito ang pagtingin at/o paggamit sa nilalaman na makikita sa website o sa pamamagitan nito, at walang layuning palitan o palawigin ito, at hindi din ito papalitan o papalawigin. Ang naturang pag-access at paggamit ay palaging alinsunod sa: (i) Mga Tuntunin at Kundisyon; (ii) Mga Babala sa Risk; at (iii) Kabuuang Disclaimer. Kaya naman ang naturang nilalaman ay ituturing na pangkalahatang impormasyon lamang. Mangyaring isaalang-alang na ang mga nilalaman ng aming Online Trading Facility ay hindi paglikom, o alok, para magsagawa ng anumang transaksyon sa mga pinansyal na market. Ang pag-trade sa alinmang pinansyal na market ay nagtataglay ng mataas na lebel ng risk sa iyong kapital.
Lahat ng materyales na nakalathala sa aming Online Trading Facility ay nakalaan para sa layuning edukasyonal/pang-impormasyon lamang at hindi naglalaman – at hindi dapat ituring bilang naglalaman – ng payo at rekomendasyon na pangpinansyal, tungkol sa buwis sa pag-i-invest, o pang-trade, o tala ng aming presyo sa pag-trade, o alok para sa, o paglikom ng, transaksyon sa alinmang pinansyal na instrument o hindi ginustong pinansyal na promosyon.
Sa anumang nilalaman na galing sa ikatlong partido, pati na ang mga nilalaman na inihanda ng XM, ang mga naturang opinyon, balita, pananaliksik, pag-analisa, presyo, ibang impormasyon o link sa ibang mga site na makikita sa website na ito ay ibibigay tulad ng nandoon, bilang pangkalahatang komentaryo sa market at hindi ito nagtataglay ng payo sa pag-i-invest. Kung ang alinmang nilalaman nito ay itinuring bilang pananaliksik sa pag-i-invest, kailangan mong isaalang-alang at tanggapin na hindi ito inilaan at inihanda alinsunod sa mga legal na pangangailangan na idinisenyo para maisulong ang pagsasarili ng pananaliksik sa pag-i-invest, at dahil dito ituturing ito na komunikasyon sa marketing sa ilalim ng mga kaugnay na batas at regulasyon. Mangyaring siguruhin na nabasa at naintindihan mo ang aming Notipikasyon sa Hindi Independyenteng Pananaliksik sa Pag-i-invest at Babala sa Risk na may kinalaman sa impormasyong nakalagay sa itaas, na maa-access dito.
