Fed Signals Interest Rate Hike Likely in June

Most Federal Reserve officials on Wednesday see a June interest rate hike if the economy continued to improve.

The policymakers said if economic data points to stronger second quarter growth and labour market continue to pick up alongside inflation’s current progress, then it is possible for the committee to increase rates, according to the minutes.

The officials said last week data assured them inflation was rising towards Fed’s 2 percent target, and that they were less concerned about global economic slowdown at this point.

The hawkish view expressed by most of the Fed’s officials saw dollar gaining against its counterparts, while 10 year treasuries declined.

“The tone was hawkish, and I think probably surprised many market participants,” said Tony Bedikian, managing director of global markets for Citizens Bank in Boston. “It looks like the Fed put the June hike relatively aggressively on the table, so long as the economic data continues to show positive signs.”

Jack Ablin, a chief investment officer at BMO Private Bank in Chicago, said “they are ready to increase rate in June.”

While few other policymakers have expressed their concern about a slowdown in the economy, especially in the first quarter when gross domestic product grew at an annual rate of 0.5 percent, its lowest in two years.

“While they haven’t made a decision to move in June, they certainly want people to understand that it certainly is a possibility,” said Stephen Stanley, chief economist at Amherst Pierpont Securities LLC in New York. If the data are good, “I think the markets will probably have to continue to up the odds of a June move,” he said.