Fed Officials Say June Hike Still on the Table but Data Dependant

The Federal Reserve could still hike interest rates in June despite weak recent U.S. data and investor skepticism, two influential officials with the central bank said on Wednesday, putting the spotlight squarely on the economy’s performance in the next two months.

Disappointing U.S. jobs growth, manufacturing activity, and retail sales over the winter had pushed market expectations for a rate hike to later in the year. June has long been seen as the earliest the Fed could tighten policy, after more than six years of near-zero rates.

But New York Fed President William Dudley and Fed Governor Jerome Powell on Wednesday sketched out scenarios in which the central bank could make an initial move earlier than many now expect and then proceed in a slow and gradual manner on further rate increases.

“I could imagine circumstances where a June rate hike could still be in play,” Dudley, a permanent voting member on the Fed’s policy committee and a close ally of Fed Chair Janet Yellen, told a Reuters Newsmaker event in New York.

“If the economy’s strong, the unemployment rate is dropping, wages are rising, and the outlook is good, you could conceivably get to that point,” he said, adding “the bar is probably a little bit higher” for a June hike given recent data.

via Reuters

Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza