Fed’s Kashkari open to a pause in rate increases in June; Citi still expects a 25bps hike

Minneapolis Fed President Neel Kashkari told the Wall Street Journal that he is open to the central bank adopting a wait-and-see approach at the next meeting in June.

“I’m open to the idea that we can move a little bit more slowly from here,” Kashakri told WSJ.

His comments came after Fed Chair Powell also said that the central bank may opt not to raise rates in June.

“Until very recently, it has been clear that further policy firming would be required. As policy has become more restrictive, the risks of doing too much versus doing too little are becoming more balanced,” Powell said Friday at a conference.

Earlier this month, the by 25 basis points to a range between 5% and 5.25%, a 16-year high.

“I would object to any kind of declaration that we’re done. If the committee chooses to skip a meeting because we want to get more information, I could make the argument why that makes sense,” Kashkari said.

“A skip to get more information is very different in my mind than [saying], ‘Hey, we think we’re done.’”

Despite the latest comments by Kashkari and Powell, Citi economists still expect the Fed to raise rates by 25 bps in June.

“We read Chair Powell’s comments last Friday as consistent with this data dependent approach. Our projections for upcoming data, including core PCE inflation released Friday May 26, suggest the Fed will find itself revising up growth and inflation forecasts and raising rates again by 25bp in June,” Citi economists said in a note.

Fed’s next meeting is taking place on June 13-14. According to Investing.com’s Tool, the chances that the Fed hikes by 25 bps in June are currently at 23%.

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