WASHINGTON (AP) 鈥� Federal Reserve officials were divided earlier this month on whether to pause their interest rate hikes at their upcoming meeting in June, according to the minutes of their released Wednesday.
鈥淪everal (policymakers) noted if the economy evolved along the lines of their current outlooks, then further policy firming after this meeting may not be necessary鈥� 鈥� Fed parlance for a pause 鈥� the minutes said.
At the same time, 鈥渟ome鈥� officials said that the meant that 鈥渁dditional (rate hikes) would likely be warranted at future meetings.鈥�
Yet those supporting a pause may have the upper hand. Chair Jerome Powell and the officials closest to him have signaled in speeches over the past week that they're likely to support a pause in rate hikes at their next meeting in mid-June.
鈥淲e think it won鈥檛 be difficult to get consensus on a June pause if it is coupled with the promise that further hikes could be needed if the data do not cooperate,鈥� Ellen Zentner, chief U.S. economist at Morgan Stanley, wrote in a research note.
The Fed raises its key rate to lift the cost of mortgages, auto loans, credit card borrowing and business loans. By making borrowing more expensive, the Fed seeks to slow growth and inflation. Fed officials have raised their benchmark rate for 10 straight meetings, to about 5.1%, a 16-year high.
Wednesday's minutes also underscored the unusually uncertain economy that Fed officials are assessing as they consider their next policy moves. The officials remained unsure about how severely the collapse of might lead to a pullback in lending. And the conflict over the could trigger a recession if President Joe Biden and House Republicans fail to agree by sometime in early June to raise the debt limit and avoid a first-ever default on Treasury securities.
At the Fed meeting this month, officials 鈥済enerally expressed uncertainty about how much more鈥� they should raise interest rates, the minutes said.
That divergence has pointed to a likely compromise: Instead of an indefinite pause to rate hikes, the officials may back a so-called 鈥渟kip鈥�: Under this scenario, the Fed wouldn鈥檛 raise rates at the June meeting but would signal that it remains open to future hikes if inflation stays too far above its 2% target in the coming months.
Though that possibility wasn鈥檛 explicitly discussed at this month's meeting, the minutes said that 鈥渟ome鈥� officials wanted to make clear that any signal that the Fed would pause its hikes in June 鈥渟hould not be interpreted as signaling either that鈥� the central bank would cut rates soon 鈥渙r that further increases in the target range had been ruled out.鈥�
At a news conference , Powell said there had been a discussion about forgoing rate increases at future meetings, though he wouldn鈥檛 say how many officials had favored doing so.
鈥淭here鈥檚 a sense," Powell said then, "that we鈥檙e much closer to the end of this than to the beginning. We feel like we鈥檙e getting close or, maybe even there.鈥�
Also Wednesday, Christopher Waller, a member of the Fed鈥檚 Board of Governors, suggested that inflation remains too high and hasn鈥檛 made much progress toward the Fed鈥檚 2% target. As a result, Waller indicated, it鈥檚 too soon to say what the Fed should do at its next meeting in mid-June.
It鈥檚 not yet clear, he said, if the Fed鈥檚 key rate is high enough to slow borrowing, spending and inflation.
鈥淚 do not support stopping rate hikes unless we get clear evidence that inflation is moving down towards our 2 percent objective,鈥� Waller added. 鈥淏ut whether we should hike or skip at the June meeting will depend on how the data come in over the next three weeks.鈥�
Christopher Rugaber, The Associated Press
