WASHINGTON (dpa-AFX) – Representatives of the US Federal Reserve have announced an interest rate pause in June. However, this does not mean an end to the rate hikes. “A decision to keep interest rates steady at any forthcoming meeting should not be interpreted as meaning that we have reached the peak of this cycle,” Fed Governor Philip Jefferson said in Washington on Wednesday. The omission of a rate hike would allow the Fed to see more data before deciding on the extent of further tightening monetary policy decides.
The head of the regional central bank of Philadelphia, Patrick Harker, made a similar statement. “I’m definitely one of those people thinking about skipping a raise at this session,” he said. However, one must be prepared to possibly do more at the meetings to come.
Recently, expectations had increased on the financial markets that the Fed could raise the key interest rate again by 0.25 percentage points in June. For example, the increase in the number of vacancies in April supported this expectation. The next interest rate decision will be made on June 14th. The dollar came under pressure after the statements. The euro then recovered from previous losses. US Treasury yields fell.
The Fed also released its Beige Book economic report. The economy in the United States has therefore stagnated recently. According to the report, economic activity has changed little. Four districts saw slight increases, while activity remained stable in six districts and moderately contracted in two. The assessment is therefore similar to that of mid-April.
The business contacts surveyed were somewhat more skeptical about future growth prospects, it said. However, economic growth is expected to continue.
Prices have recently risen moderately, while the rate of price increases has slowed down in many districts. The business contacts surveyed expect constant price pressure. Employment has increased in most districts. However, the momentum in many districts has slackened. The survey relates to the period from April to early May./jsl/stw