Federal Reserve officials reportedly seem more divided than ever on whether more interest rate hikes are needed.
Officials’ comments signaling different opinions on the issue come about a month ahead of the regulator’s next meeting, which will be held June 13-14, Bloomberg reported Thursday (May 18).
The report cited remarks from Governor Philip Jefferson advocating patience. He said the economy may not yet be showing the effects of past rate hikes. Other Fed officials seem to be leaning toward pausing any further hikes.
It also cited contrasting remarks from Dallas Fed President and CEO Lorie Logan, Cleveland Fed President and CEO Loretta Mester and Governor Michelle Bowman suggesting they favor continuing the Fed’s credit-tightening campaign because the fight against inflation is not yet over.
Logan and Atlanta Fed President and CEO Raphael Bostic have also mentioned the possibility of skipping action at the June meeting and considering the issue again in July, according to the report.
At its May meeting, Fed officials shifted to considering rate hikes at each meeting, the report said.
Investors increasingly expect another rate hike, whether in June or July, per the report.
The debate comes at a time when inflation remains higher than the Federal Reserve’s target despite their having raised rates by 5 percentage points over the last 14 months, according to the report.
Data released by the Federal Reserve May 8 showed that consumers think inflation is here for the long term.
The regulator’s April “Survey of Consumer Expectations” report showed that median household spending growth expectations decreased from 5.7% in March to 5.2% in April, the lowest reading since September 2021.
Another report released by the Fed May 8 showed that banks expect to continue tightening lending standards across all loan categories through the rest of 2023.
The “April 2023 Senior Loan Officer Opinion Survey on Bank Lending Practices” said banks are doing so because they expect both the credit quality of their loan portfolios and the value of their customers’ collateral to deteriorate.
The Fed’s rate hikes have also threatened to make it tougher for retailers to sell their inventories.