The Fed will set interest rates on June 14. The market currently expects rates to hold steady, but will be looking for clues on future moves.
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Market Committee meeting in Washington, DC, US, on Wednesday, May 3, 2023. The Federal Reserve raised interest rates by a quarter percentage point and hinted it may be the final move in the most aggressive tightening campaign since the 1980s as economic risks mount. Photographer: Al Drago/BloombergThe U.S. Federal Reserve will set the target for short-term interest rates on June 14 at 2pm EST. It could be the first time that the Fed chooses to hold rate steady in 18 months.
In recent public statements, Fed officials have argued that monetary policy is currently restrictive, but that core inflation remains too high. As such, the Fed still has a bias towards increasing rates further if needed, but at least for the June meeting, may adopt more of a patient position in monitoring the lagged effects of past rate moves.
Assuming rates are held steady, the key question is whether the Fed sees the current situation as a pause with potential for further hikes, or perhaps the top of this rate cycle. Currently messaging from Fed leaders has been more hawkish. This implies frustration with progress on inflation, and that further rate hikes are possible, even likely.
It seems likely that the Fed will hold rates steady at its June meeting, though maybe there won’t be consensus given a few policymakers are perhaps looking for higher rates. The key question is if, and when, the Fed may be tempted to raise rates again in 2023, or if the Fed starts to dial back expectations for additional hikes either due to concern about the jobs market or greater optimism regarding disinflation. Either way, there isn’t much expectation that rates rise much from current levels.
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