Fed's Jefferson, Harker hint at temporary rate pause ahead of June meeting

Federal Reserve Governor Phillip Jefferson and Philadelphia Federal Reserve President Patrick Harker issued comments hinting at the likelihood of a rate hike pause at the June FOMC meeting. Yahoo Finance Fed reporter Jennifer Schonberger breaks down the statements made by the Fed officials and what the wording may mean for rate hike expectations for the rest of 2023.

Video transcript

- June. That's according to Governor Jefferson, who spoke ahead of the release of the Beige Book, and Phillips governor Harker soon followed suit. Yahoo Finance's Jennifer Schonberger has been following this. Jen, take us through what you've got.

JENNIFER SCHONBERGER: Hey there, Diane. That's right. Two Fed officials suggesting that the Fed could pause rate hikes at the June meeting, though that wouldn't necessarily mean that the Fed is done raising rates. Third Fed governor Phillip Jefferson speaking this afternoon in Washington said, quote, "A decision to hold our policy rate constant at a coming meeting should not be interpreted to mean that we have reached the peak rate for this cycle. Indeed, a rate hike, skipping a rate hike at a coming meeting would allow the committee to see more data before making decisions about the extent of additional policy firming."

Meanwhile, Philadelphia Fed President Patrick Harker speaking at a Q&A in Philly this afternoon said, quote, "I am in a camp increasingly coming into this meeting of thinking that we should really skip not pause." Though Harker reserved the right to look at the jobs report on Friday and the consumer price index due out on the first day of the Fed's meeting June 13.

Parker said he likes the word skip as opposed to pause, because pause implies that the Fed would be stopping raising rates for some time. Though he noted that the Fed might have more work to do and he's willing to do that, but he just wants to give it more time. Now, these comments are coming after jobs openings spiked to the highest level since January, and after a report on Friday that showed inflation accelerated in the month of April.

Take a look at the Fed funds futures, because this morning they were pricing it a better than 70% chance that the Fed would hike rates at the next meeting. Now, after Jefferson and Harker's comments, a 64% chance of a pause next meeting. Elsewhere, meanwhile, the Fed's Beige Book showed inflation is slowing down, and several districts noted that consumers are showing more sensitivity to price increases.

High inflation also in the end of COVID. Benefits have continued to put stress on budgets for low to moderate income households, and they are seeing more demand for social services, including food and housing. Ladies.

- Jennifer Schonberger. Thank you so much.