Economist Predictions: Federal Reserve Signals Pause on Rate Hikes Amid Debt Ceiling Suspension – Coinpedia Fintech News

On Wednesday, the U.S. House of Representatives managed to secure the backing of both Democrats and Republicans, successfully passing a bill that seeks to temporarily suspend the $31.4 trillion debt ceiling. This legislation removes the borrowing limit of the federal government until January 1, 2025. 

With the Federal Reserve nearing its upcoming decision on whether to raise interest rates in June, all attention is now focused on this critical moment. In a recent televised interview on Friday, David Wessel, a respected economist and director of the Hutchins Center on Fiscal & Monetary Policy, offered his insights on monetary policy and the highly anticipated proposal for a rate hike. 

Fed Likely to Skip Rate Hike in June

Renowned industry veteran David Wessel recently shared his perspective, suggesting that the Federal Reserve is inclined to skip raising interest rates at the upcoming June meeting. Wessel pointed to several factors to support his belief, including favorable conditions in the labor market, a decline in inflation, and the successful avoidance of a potential default scenario, which could have had severe repercussions on the financial markets.

During the interview, Wessel said, “I think it’s pretty clear the Fed is going to skip rate hikes at the June meeting.” 

Further, Wessel emphasized that choosing to maintain the policy rate at the upcoming meeting should not be interpreted as the Federal Reserve reaching the highest point of interest rates in this cycle. Instead, by opting to skip a rate hike, the Committee would have a chance to gather additional data and information before making any further policy decisions. 

This viewpoint of Wessel is similar to the one made by Fed Chair Jerome Powell on May 19, where he also indicated his support for pausing rate hikes during the June meeting in order to assess the economic consequences of previous rate adjustments.

https://youtube.com/watch?v=hHt9yoVq0g0%3Ffeature%3Doembed

Federal Officials Indicate Preference to Pause Rate Hikes 

Prominent figures within the Federal Reserve have recently conveyed clear indications of their preference to abstain from raising interest rates at the upcoming central bank meeting. Philadelphia Federal Reserve Bank President Patrick Harker, for instance, expressed his inclination to support a decision to “skip” the interest rate hike in June. Harker, however, noted the potential for his viewpoint to change based on upcoming economic data, showing a willingness to adapt to evolving circumstances.

Over the course of ten consecutive meetings, the Federal Reserve has steadily raised interest rates, resulting in a total increase of 5 percentage points in the benchmark federal funds policy rate. Currently, the rate stands at a range of 5.0% to 5.25%. 

However, it seems like the rate hike could pause for sometime.

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