Renowned Economist Predicts Federal Reserve To Skip June Rate Hike

In the wake of the successful passing of the Debt-limit bill by the U.S. House of Representatives and subsequent approval from the Senate, all eyes are now on the Federal Reserve as it approaches its next interest rate hike decision scheduled for June. Prominent economist and director of the Hutchins Center on Fiscal & Monetary Policy, David Wessel, shared his perspective on monetary policy and the anticipated rate hike proposal in a recent televised interview on Friday.

David Wessel Hints “Skip” In Rate Hikes

The 69-year-old industry veteran expressed his belief that the Federal Reserve is likely to skip rate hikes at the June meeting, citing positive labor market conditions, decreasing inflation and the U.S. averting a possible default situation, which could have triggered a catastrophic market crash.

During the interview, Wessel — a two-time Pulitzer Prize awardee — was quoted as saying:

I think it’s pretty clear the Fed is going to skip rate hikes at the June meeting.

He further highlighted that although the decision to hold the policy rate constant at an upcoming meeting should not be interpreted as reaching the peak rate for this cycle, skipping a rate hike would instead provide the Committee with an opportunity to gather more data before making further policy decisions. This aligns with the sentiments expressed by Fed Chair Jerome Powell on May 19, who also signaled support for pausing rate hikes at the June meeting to assess the economic impact of previous rate increases.

«I think it’s pretty clear the Fed is going to skip rate hikes at the June meeting,» says @BrookingsInst’s @davidmwessel. He explains why: pic.twitter.com/Zokse5VGKz

— Squawk Box (@SquawkCNBC) June 2, 2023

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Fed Officials Onboard With Skipping Hikes

Notably, several influential figures within the Federal Reserve have sent strong signals indicating a preference for bypassing an interest rate increase at the central bank’s next meeting. Philadelphia Federal Reserve Bank President Patrick Harker recently stated that he is inclined to support a “skip” in interest rate hikes in June, although acknowledging the fact that forthcoming economic data could potentially alter his perspective.

The Federal Reserve has implemented a series of rate hikes for ten consecutive meetings, resulting in a cumulative increase of 5 percentage points in the benchmark federal funds policy rate, which currently stands between 5.0% and 5.25%. However, the prevailing positive economic indicators, coupled with the cautious stance adopted by economists, policymakers, and leading Fed officials, suggest a temporary halt in the rate hike trajectory.

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