Should the Fed Pause in June Part 1

The Federal Reserve is now openly discussing the possibility of pausing its rate hikes in June, a sign that officials are worried about the impact of their aggressive monetary tightening on the economy.

In recent weeks, several Fed officials have said that they are open to the idea of pausing rate hikes after the central bank’s next meeting in June. This would be a significant shift from the Fed’s previous stance, which was to raise rates by 50 basis points a meeting.

Several Federal Reserve officials have recently discussed the possibility of pausing rate hikes in June. These officials include:

• Loretta Mester, president of the Cleveland Fed: Mester said in a speech on May 10 that she is “inclined to pause” rate hikes after the June meeting. She said that the Fed needs to “see how the economy is responding” to the recent rate hikes before deciding whether to continue raising rates.
• Thomas Barkin, president of the Richmond Fed: Barkin said in a speech on May 11 that he is “open to the idea” of pausing rate hikes after the June meeting. He said that the Fed needs to “be careful not to overshoot” in its efforts to combat inflation.
• John Williams, president of the New York Fed: Williams said in a speech on May 12 that he is “not seeing a need” for the Fed to raise rates by 75 basis points at its next meeting. He said that the Fed can “take a more measured approach” to raising rates.

These comments from Fed officials suggest that there is a growing debate within the Fed about the pace of rate hikes. Some officials believe that the Fed needs to continue raising rates aggressively in order to combat inflation. Others believe that the Fed should pause rate hikes in order to assess the impact of the recent rate hikes on the economy.

The Fed’s decision on whether or not to pause rate hikes in June will be closely watched by markets. If the Fed does pause rate hikes, it would be a sign that the central bank is concerned about the potential for a recession. It would also be a sign that the Fed is acknowledging that its previous policy of raising rates aggressively was not sustainable.

The change in tone reflects the growing concern among Fed officials about the potential for a recession. Despite recent moderation inflation is running at a high levels, and the Fed is raising rates in an effort to cool the economy. However, there is a risk that the Fed could raise rates too quickly and tip the economy into a recession.

The market is pricing that we are done with rate hikes.