Federal
Reserve
officials
could
talk
tough
enough
at
their
June
meeting
that
it
would
amount
to
a
de
facto
interest
rate
hike.
Markets
are
assigning
a
low
probability
that
policymakers
will
approve
what
would
be
the
11th
consecutive
rate
increase
since
March
2022.
But
the
rate-setting
Federal
Open
Market
Committee
still
could
telegraph
that
policy
is
likely
to
stay
tight
well
into
the
future,
despite
the
market
pricing
that
the
Fed
will
cut
by
at
least
half
a
percentage
point
before
the
end
of
2023,
according
to
an
analysis
from
Evercore
ISI.
“Expect
ongoing
pushback
on
early
rate
cuts
and
efforts
to
underscore
the
possibility
of
more
hiking:
this
may
serve
as
a
substitute
for
a
June
hike,”
Krishna
Guha,
the
firm’s
head
of
global
policy
and
central
bank
strategy,
said
in
a
note.
“Indeed,
the
deal
in
June
may
involve
an
explicit
tightening
bias
in
return
for
a
pause.”
Traders
in
the
fed
funds
futures
are
assigning
a
roughly
1
in
4
probability
that
the
FOMC
increases
its
benchmark
rate
by
another
25
basis
points
following
the
June
13-14
meeting,
according
to
the
CME
Group’s
FedWatch
tracker.
The
fed
funds
rate
currently
is
targeted
in
a
range
of
5%-5.25%
after
it
was
near
zero
prior
to
the
beginning
of
the
hiking
cycle.
A
basis
point
is
1/100th
of
a
percentage
point.
Multiple
officials
have
spoken
publicly
in
recent
days,
with
most
taking
a
cautionary
tone
about
the
path
ahead
while
universally
noting
that
inflation
is
still
too
high.
In
separate
CNBC
interviews
on
Monday
,
Atlanta
Fed
President
Raphael
Bostic
said
he’d
be
more
inclined
to
raise
rates
than
cut
at
this
point,
while
Chicago’s
president,
Austan
Goolsbee
,
said
it’s
too
early
to
determine
what
the
next
move
might
be.
Conversely,
Cleveland
president
Loretta
Mester
tilted
hawkish,
saying
she’s
not
convinced
the
Fed
has
gone
far
enough
in
its
fight
to
bring
down
inflation.
Chair
Jerome
Powell
will
be
speaking
Friday
at
the
Fed-sponsored
“Perspectives
on
Monetary
Policy”
forum
in
Washington,
D.C.
How
a
‘substitute’
hike
could
happen
Totaling
up
the
multiple
Fed
speeches
in
recent
days,
Guha
concluded
that
“we
see
little
clear
evidence
of
an
effort
to
gear
up
to
hike
again
in
June.”
“All
Fed
officials
are
being
careful
not
to
exclude
a
June
hike
with
more
data
to
come
and
we
would
not
completely
exclude
this
either,”
he
added.
However,
he
expects
officials
to
take
in
data
over
the
summer
“and
make
a
call
in
September
as
to
whether
it
has
done
enough
but
needs
to
go
on
extended
hold,
needs
to
nudge
rates
up
further,
or
should
soften
its
opposition
to
a
possible
December
rate
cut
(our
base
case).”
A
“substitute”
hike
could
see
the
rhetoric
out
of
the
June
meeting
reasserting
the
Fed’s
stern
commitment
to
fighting
inflation
and
disinclination
toward
easing
anytime
soon.
Members
will
get
to
express
their
outlook
for
rates
through
the
quarterly
“dot
plot”
update
of
what
they
expect
this
year
through
2025
and
for
the
longer
time
frame.
As
recently
as
a
week
ago,
markets
had
been
pricing
in
nearly
an
80%
chance
of
a
September
cut.
But
some
taming
in
the
inflation
data
,
stronger
economic
signals
and
repeated
statements
from
central
bankers
that
cuts
are
not
in
their
forecast
have
caused
a
shift.
The
first
cut
is
not
expected
now
until
November,
with
a
67%
chance
of
another
to
follow
in
December,
the
CME
Group
data
shows.
Fed
fund
futures
contracts
are
implying
a
4.585%
funds
rate
by
year-end,
from
the
current
5.08%.
Guha
said
the
“general
tenor”
of
Fed
commentary
will
be
“pause-y”
that
will
keep
policy
options
open.
“Given
lags
and
noise
in
the
data,
as
well
as
elevated
risk
of
shocks
from
the
debt
ceiling
crisis,
September
seems
to
be
the
right
decision
horizon
absent
a
very
strong
upside
surprise
in
the
data
in
between,
though
no
one
should
expect
the
Fed
to
say
it
is
on
pause
until
then,”
he
said.