Yet much of that drop reflected sharply lower gas prices and slowdown in food inflation. Consumer prices as a whole rose a modest 4% in May from 12 months earlier, the smallest such rise in more than two years and way below April's 4.9% annual increase. This group is concerned that hiking too aggressively would heighten the risk of causing a deep recession.Ī government report Tuesday on inflation offered some ammunition to both camps, with overall price increases sharply slowing but some measures of underlying inflation remaining high. The 18 committee members appear split between those who favor one or two more rate hikes and those who would like to leave the Fed's key rate where it is for at least a few months and see whether inflation further moderates. Economists at Goldman Sachs have estimated, though, that such damage will be modest.įor the Fed, “skipping” a rate hike at this week's meeting may be the most effective way for Powell to unite a fractious policymaking committee. Some analysts have expressed concern that the collapse of three large banks last spring could cause nervous lenders to sharply tighten their loan qualifications and worsen the drop in lending. Banks have been slowing their lending - and demand for loans has fallen - as interest rates have risen. Yet top Fed officials have made clear that any such pause may be brief - more of a “skip” - with another rate hike likely as soon as their next meeting in late July.įed Chair Jerome Powell and other top policymakers have also indicated that they want to assess how much a pullback in bank lending might be weakening the economy. Fed keeps rates unchanged for 1st time in 15 months, signals what’s to come
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