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US Fed looks at June rate rise

US Fed looks at June rate rise

The US Federal Reserve could move rates higher next month if economic growth and other data signals continue to strengthen in the second quarter.

Minutes from the central bank’s policy meeting in April showed an increasing preference for increasing interest rates, with a few participants suggesting the bank could have raised rates in April as “downside risks associated with global economic and financial developments had diminished substantially since early this year”.

In addition two members of the committee suggested there was a risk that the removal of policy accommodation “was proceeding too slowly” and therefore the committee might have to raise rates quickly to combat inflation “potentially unduly disrupting economic or financial activity”.

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The policymakers, however, agreed any action would be determined by incoming data, with “most participants” judging that if data supported a pick up in economic growth, strengthening labour market conditions and increasing inflation, “then it likely would be appropriate for the committee to increase the target range for the federal funds rate in June”.

Some members, however, expressed concern that the incoming information might not provide “sufficiently clear signals” to determine by mid-June whether an increase in the interest rates would be warranted.

Therefore the committee agreed it would be appropriate to “leave their policy options open and maintain the flexibility to make this decision” based on the incoming data and developments.