Policymakers at the Federal Reserve signaled last month that they were considering a pause in their 14-month long regimen of hiking interest rates to cool the economy and bring down inflation.
But the US economy is like an engine that won’t quit — it just keeps on pumping out jobs.
Fed Governor Philip Jefferson — who is set to be Fed Chair Jerome Powell's number two — said Wednesday that a pause at the central bank's June 13-14 meeting wouldn’t mean that hikes are finished but would instead give central bank officials more time to assess the state of the economy.
“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,” said Jefferson in a speech. “Indeed, skipping a rate hike at a coming meeting would allow the committee to see more data before making decisions about the extent of additional policy firming.”
Bankrate senior economic analyst Mark Hamrick said: “While the Fed is still talking like it is on the inflation righting warpath, the resilience and strength of the job market have been remarkable.”
Markets are currently placing the probability of a quarter-point rate hike in June only at about 30%, according to CME FedWatch. That’s up from around 0% in mid-May. Prior to Jefferson’s speech, markets were pricing in a 70% chance.
Uncertainty seems to be the name of the game right now.
“Markets may wish for a Fed pivot, but we believe that hope is not a strategy,” said David Kotok, chairman and chief investment officer at Cumberland Advisors.
“Of course,” he added, “that could change at any time.”