Fed officials have suggested they may keep rates on hold at their scheduled meeting in June, pausing rates after the 10th straight hike to give them time to assess economic conditions. But Friday’s new jobs report could provide information to policymakers trying to decide if now is the right time to take a break.
Central bankers raised interest rates to a certain range 5 to 5.25 percent But they have been suggesting for months that an immediate pause in rate hikes may be appropriate to assess how the economy is absorbing the big policy, which they have already done. As a result of changes and other developments such as the aftermath of the recent banking turmoil.
Rising interest rates will make it more expensive to borrow to buy a home or finance a car and will cool the economy, but the full effect will take time. As interest rates rise, businesses will gradually abandon expansion plans, cutting jobs, which in turn slows wage growth and slows the economy as a whole.
That’s why policymakers are turning to job market data to understand the impact of higher interest rates. They expected employment to slow, wage growth to recede and unemployment to start rising, but that has taken time.
Some Fed officials favor holding off June’s rate hike to give them more time to see how higher borrowing costs and heightened uncertainty combine to dampen the economy. . Philadelphia Federal Reserve Bank President Patrick T. Harker said: said this week “We are definitely considering not raising rates at this meeting,” he said.
Others stressed that while the Fed may be ready to pause its campaign to cool the economy, that doesn’t mean it’s completely finished raising rates.
Fed Governor Philip Jefferson, who was nominated by President Biden to be Fed Vice Chairman, said, “The decision to keep the policy rate steady at its next meeting should not be construed to mean that the highest interest rate of the cycle has been reached.” Stated. , during a speech this week.
“Certainly forgoing a rate hike at its next meeting would allow the Commission to see more data before making a decision on the extent of additional policy enhancements,” Jefferson added. Fed Vice Chairs have traditionally been key communicators for the Fed, telling them what core officials think about future policy directions.
But even if the Fed moves toward a possible moratorium this month, officials will still consider upcoming economic data.Headline inflation data released last week are stronger than economists expected, officials receive new CPI inflation report that day The June 13th and 14th meetings will begin.
Friday’s jobs report could confirm whether the skip made sense, or call into question if it performed exceptionally well.
