FOMC April meeting minutes hint at possibility of rate hike in June

The US Fed meeting minutes released yesterday showed quite a hawkish view of Fed officials. This indicates that several participants believed in April that it is appropriate to raise rates in June if the incoming data indicated a rebound in the economy. This is quite unexpected as there is an evident cut off between the minutes’ hawkish tone and the dovish statement post-meeting, where the FOMC avoided making a clear risk assessment, noted Nordea Bank. The April’s post-meeting statement had indicated no haste in hiking rates.

In all the April meeting minutes clearly shows that there is a rise in the possibility of a rate hike in June. But even if the recent data, including retail sales result of April underpin the US central bank’s projection of a rebound in economic growth in the second quarter, the FOMC minutes were before the moderate growth in April employment data was released, said Nordea Bank. Hence, the possibility of a hike in June requires to be seen in that light.

Before the FOMC minutes’ release, market was already projecting the US Fed’s preference of two hikes this year. The fed funds futures indicate that the chance of Fed hiking rates in June has increased to 32% from 4%, whereas the possibility of hiking in July has risen to 48%. The chance of hiking in December increased to 75% from 56%.

According to San Francisco Fed President Williams and Atlanta Fed President Lockhart, non-voters and centrists said the central bank might hike rates at least twice in 2016. Kansas City President George had mentioned last week that interest rates are quite low, while Boston Fed President Rosengren stated that “there are risk of imbalances if rates stay too low for too long”, noted Nordea Bank.