The Federal Reserve recently announced a 0.25% increase in interest rates, with focus turning to Fed Chair Jerome Powell's comments regarding the June meeting and beyond. While Powell indicated that rates would not be kept steady in May, he left open the possibility of a pause in June. Powell's statements about a "meaningful" change in the Fed's language surrounding rate hikes led to a decline in stocks, with Powell stressing that cutting rates would not be appropriate given inflation forecasts.
Several Wall Street experts have provided their insights on the decision and Powell's comments. Jay Bryson, Chief Economist at Wells Fargo, sees the decision as signaling a "hawkish pause" in the tightening cycle, with the possibility of further rate hikes still on the table. Michael Gapen, U.S. Economist at Bank of America, believes that the Fed has reached its terminal rate in the tightening cycle but that a rate hike in June could still be appropriate depending on regional bank stress, labor markets, and inflation. Rick Rieder, Chief Investment Officer of Global Fixed Income at BlackRock, notes that the Fed is still focused on reducing inflation but is now entering a new phase where policy restrictiveness is having an impact on the economy.
Andrew Hunter, Deputy Chief U.S. Economist at Capital Economics, notes that the Fed is finally willing to step back and assess the impact of its tightening policy over the past year. Ryan Sweet, Chief U.S. Economist at Oxford Economics, believes that the removal of language about "policy firming" in the post-meeting statement suggests that the Fed will not hike rates in June, given stress in the banking system and the tightening of lending standards. Ian Shepherdson, Chief Economist at Pantheon Macroeconomics, predicts that the Fed will leave rates on hold in June based on the two rounds of payroll, CPI, PPI, and activity data expected before the meeting.
Finally, Dennis Lockhart, Former President of the Federal Reserve Bank of Atlanta, sees the decision to raise rates as necessary in light of the inflation fight, with financial stability concerns not yet outweighing policy decisions. In conclusion, the experts agree that the Fed is still focused on reducing inflation and that the decision to raise rates was necessary, but opinions vary on the possibility of further rate hikes in June and beyond.
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