In contrast to the market’s expectations that the Federal Reserve could cut its benchmark interest rate later this year, ahead of a potential sharp economic slowdown and possible recession, central bank officials signaled they see rates staying high and possibly even rising.
Atlanta Fed President Raphael Bostic told CNBC he doesn’t foresee rate cuts this year, even in a recession. The Fed is determined to return inflation to the 2% target rate. The best policy is “wait and see” he said, to assess how well the actions to date have worked.
Minneapolis Fed President Neel Kashkari said at a town hall discussion at the Minnesota Transportation Conference on Monday that with inflation remaining above target, “we need to finish the job.” Inflation rose at a 4.9% annual pace in April from 5% in March but is still “much much too high.”
Chicago Fed President Austan Goolsbee told CNBC that elevated uncertainty calls for more prudence and patience, and more data, saying officials are “watching the credit stresses, watching the craziness of the debt ceiling, and watching what’s happening in the labor market, and the prices.”
Total consumer debt in the first quarter hit a fresh high above $17 trillion despite a major pullback in home borrowing as interest rates rose, according to the New York Fed. Total debt is up about $2.9 trillion the last quarter of 2019, just before the beginning of the pandemic.
Financial markets are anticipating only a small likelihood of another rate hike at the Fed’s June 13-14 policy meeting, and interest rate futures contracts are anticipating the policy rate to end up around 4.25%-4.50% this year, below current levels, according to the CME FedWatch tool.
Write to Janet H. Cho at [email protected]
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