Federal Reserve policymakers got a dose of unexpectedly strong U.S. economic data on Friday that bolstered the case for further monetary policy tightening to bring down persistently high inflation.
"Right now, when I look at the data and when I look at what's happening with the inflation numbers, I do think we are going to have to tighten a bit more," Cleveland Fed President Loretta Mester told CNBC. In March Mester had already expected the Fed to raise the policy rate beyond its current 5.00%-5.25% range.
Analysts at LHMeyer, who previously figured the Fed was done raising rates, on Friday said they now see the Fed taking its benchmark up two more notches, to 5.6%, before stopping.A rate hike next month is not a done deal: still to come before the Fed's June 13-14 meeting is a key read on the labor market due next Friday and fresh data on inflation expected on June 13.
Expectations are growing though that even if the Fed leaves rates unchanged in June, it will pull the trigger in July. Odds in futures markets are running three to one in favor of a rate hike by then.
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