Fed Meeting Gets Closer - A Rate Hike Too?

Wow… time really flies, right? June is already here and the Federal Open Market Committee is expected to raise its benchmark interest rate for the second time this year.

At this moment, the reference rate stands in a range between 1.50 and 1.75 percent following March’s increase. This month traders are also awaiting for a 25-basis-points move.

Of course, it would all depend on how the economy presents itself with economic data. And today is going to be a major date for market players as the Labor Department will release its latest employment report, which is very relevant when it comes to defining policy measures.

“In view of realized and expected labor market conditions and inflation, the Committee (FOMC) decided to maintain the target range for the federal funds rate at 1-1/2 to 1-3/4 percent.”

In minutes from its May monetary policy meeting, FOMC agreed that the economy remains on positive vias, but reassured the need for active controlling to maintain healthy expansion levels.

“The stance of monetary policy remains accommodative, thereby supporting strong labor market conditions and a sustained return to 2 percent inflation.”

In May, Federal Reserve voting members opted to leave interest rates unchanged between 1.5 and 1.75 percent, while keeping a hawkish tone on policy adjustments.

By the way… do you know who are the voting members of the FOMC? Jerome H. Powell, Chairman; William C. Dudley, Vice Chairman; Thomas I. Barkin; Raphael W. Bostic; Lael Brainard; Loretta J. Mester; Randal K. Quarles; and John C. Williams.

Last week, San Francisco Fed President John Williams said he believes the current neutral rate is at 2.5 percent, although the fed-funds rate could remain “for some time, below levels that are expected to prevail in the longer run.”

Meanwhile, St. Louis Fed President James Bullard said the Fed will face hard times increasing rates as the BoJ and ECB continued to pursue accommodative policies.

"It is hard for U.S. rates to get too far out of line with the global rate situation, and obviously both the (Bank of Japan) and the (European Central Bank) are continuing very accommodative policies," Bullard told reporters.

We suggest keeping eyes and ears wide open in search for hints on future monetary decisions, but paying close attention to economic reports, especially inflation and labor conditions.

FortFS