Interest break possible
US monetary authorities at odds over course
05/25/2023, 00:20 am
Was that the first time with the rate hikes? There is currently no clear trend emerging from the Fed. At the last meeting, some central bankers spoke out in favor of a pause, while others wanted to leave all options open.
US monetary authorities are eyeing a pause after a series of rate hikes. That emerges from the minutes of the most recent monetary policy meeting in early May, which have now been published. According to this, the senior members of the central bank were generally agreed that after the series of interest rate hikes, further steps upwards were no longer so necessary. Some participants even stated that they believe the hike agreed at the meeting could be the last. Others countered that the central bank must keep its options open in the face of persistent inflation.
According to monetary watchdogs, declining bank lending could lead to a slight recession from the fourth quarter, which would then be followed by a slight upswing.
Almost all participants in the session also saw upside risks to inflation. Some said further rate hikes were “probably” necessary. Meanwhile, Fed Board member Christopher Waller made it clear in a speech that even if interest rates were to be paused in June, the phase of increases would not have to end. An increase in July remains an option: there will be more clarity about credit conditions by July. If bank conditions haven’t tightened excessively by then, a rate hike in July “could be the right monetary policy,” Waller said.
The Federal Reserve has kicked rates up from near zero to a range of 5.00 to 5.25 percent since early 2022 to counter inflationary pressures. This is the highest level in 16 years. However, at 4.9 percent, inflation is still well above the Fed’s target of 2.0 percent.