On Wednesday, May 31, 2023, Federal Reserve Governors Philip Jefferson and Patrick Harker both suggested that the central bank could pause its series of interest rate hikes at its next policy meeting in June.
Jefferson, who was speaking at a conference in New York City, said that the Fed is "close to our peak" in terms of raising rates. He added that the central bank will need to see "clear and convincing evidence" that inflation is coming down before it resumes hiking rates.
Harker, who was speaking at a separate event in Philadelphia, said that he is "inclined" to support a pause in rate hikes in June. He said that the Fed needs to be "data-dependent" and that it will need to see how the economy is performing before it makes any decisions about future rate hikes.
The comments from Jefferson and Harker come as the Fed is facing increasing pressure to slow its pace of rate hikes. Inflation is at a 40-year high, and the economy is showing signs of slowing down. Some economists believe that the Fed could risk a recession if it continues to raise rates too quickly.
The Fed is scheduled to meet on June 14-15. At that meeting, it is expected to raise rates by 0.50 percentage points. However, the comments from Jefferson and Harker suggest that the Fed could pause its rate hikes after that meeting.
It remains to be seen whether the Fed will follow through on the suggestions from Jefferson and Harker. However, their comments do suggest that the central bank is open to the possibility of pausing its rate hikes in June.
What does this mean for the economy?
The possibility of a pause in rate hikes could have a significant impact on the economy. If the Fed does pause its rate hikes, it will mean that there will be less upward pressure on interest rates. This could lead to lower borrowing costs for businesses and consumers, which could help to boost economic growth.
However, it is important to note that the Fed is still facing a difficult task. Inflation is still high, and the economy is showing signs of slowing down. The Fed will need to balance the need to bring down inflation with the need to avoid a recession.
It is too early to say what the Fed will do, but the comments from Jefferson and Harker suggest that the central bank is open to the possibility of pausing its rate hikes in June. This could have a significant impact on the economy, and it will be important to watch the Fed's next policy meeting closely.