Fed May Still Raise Interest Rates in June

The Era of Dangerously Lowflation, and the stagnant-wages storyline that’s gone with it, finally may be coming to an end.  So forecasts Omair Sharif, a rates sales strategist at Societe Generale in New York, who sees inflation data perking up and keeping June on the table for the Federal Reserve’s first increase in the benchmark interest rate since 2006.

Sharif recognizes he’s in what’s “becoming a very lonely camp” of economists who think the Fed will move so soon given the disappointing first-quarter economic data and the strong dollar and weak energy prices that have damped hopes of firming inflation. Of 26 economists who predicted in a March 6-11 Bloomberg survey that the central bank would raise the benchmark rate in June, 19 had pushed their forecast to July or later when polled earlier this month.

Over the next month, data on three days — April 17, April 30 and May 8 — will lower the bar for a June hike, said Sharif.   “All these pieces that have been missing are starting to come together,” said Sharif. “That should put to rest a fair bit of the arguments against inflation preventing the Fed from going.”