(Washington) Will the US Federal Reserve (Fed) at its next meeting in June raise its rates for the 11e in a row, or will she take a break? The decision has not been made, said Friday the president of the institution, Jerome Powell. Explanations.
“We have not made any decisions on the extent to which further policy tightening would be appropriate,” the Fed Chairman said in a conversation in Washington with former Chairman Ben Bernanke, who was in Washington. maneuver during the financial crisis of 2008.
PHOTO ANDREW HARNIK, ASSOCIATED PRESS
Former Fed Chairman Ben Bernanke
However, “given the path travelled, […] we can afford to look at the data and the changing outlook and make careful assessments,” said Jerome Powell.
The Federal Reserve has, since March 2022, raised its rates 10 times, at each meeting, moving them from a range of 0-0.25% to 5.00-5.25%.
This leads the banks to raise the cost of the loans they offer to households and businesses, in order to ease the pressure on prices.
But, while the effects of these increases take months to be felt in the real economy, and the recent banking crisis has led banks to be more cautious about the loans they grant, which acts as an increase in rates, the question of a pause in rate hikes is now on the table.
Because the risk of too strong a tightening would be to cause a recession.
Until very recently, it was clear that tightening the policy [monétaire] was needed. Nevertheless, as policy has become more restrictive, the risks of doing too much versus doing too little are increasingly balanced.
Fed Chairman Jerome Powell
Positions diverge among Fed officials on whether or not to continue raising rates at the next meeting, scheduled for June 13-14.
The Fed chairman “paved the way” for a pause in June, said Edward Moya, an analyst for Oanda, in a note. The analyst also points out that “the Fed could, however, resume its tightening while [Jerome] Powell reiterated that inflation is well above the Fed’s target.
Greg Daco, economist for EY, also thinks that the rate hike decided at the last meeting in early May “was probably the last of this cycle”, and anticipates “stable rates in June and throughout the year “.