Date
30 March 2017
A job seeker holds employment documents. Weaker jobs and growth numbers make a June rate hike less likely but not impossible, according to a Fed official. Photo: Bloomberg
A job seeker holds employment documents. Weaker jobs and growth numbers make a June rate hike less likely but not impossible, according to a Fed official. Photo: Bloomberg

Fed officials split over June rate rise

A widely anticipated increase in United States interest rates could happen in June but Federal Reserve policymakers are split several ways over the timing.

That means the rate hike could be moved back to later this year or into 2016.

Several members of the Federal Open Market Committee (FOMC) are leaning toward a June rate hike given the improved economic outlook, the Financial Times reported Thursday, citing minutes from a March 18 meeting of the policy-setting panel.

However, others expect falling energy prices and the a stronger dollar to keep inflation down, pushing them toward a first move later this year.

Two favor waiting until 2016.

The divisions point to uncertainty over the strength of the recovery after soft first-quarter growth figures and low inflation.

The meeting was held before last Friday’s payroll figures, which were weaker than expected, complicated the picture.

Bill Dudley, president of the New York Fed, said on Wednesday that the bar to a June rise had risen because of weaker jobs and growth data but did not rule it out.

“They have signalled that a hike is not imminent at this point but is still very likely this year,” said James Sweeney, an economist at Credit Suisse, who recently pushed back his rate-rise expectations from June to September.

US government bond prices came under pressure immediately after the minutes were released, as stocks slipped and the dollar bounced.

The yield on the two-year Treasury — among the most sensitive to changes in interest rate expectations — climbed one basis point to 0.53 per cent.

The 10-year note was also up one basis point at a shade under 1.9 per cent.

The Fed in the meeting dropped its pledge to be “patient” before lifting rates, a move backed by almost all FOMC members. The decision opened the door to a move this year.

However, FOMC participants also marked down their growth, inflation and interest-rate forecasts, prompting traders to speculate that the odds of a move in June had receded.

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