Most Federal Reserve officials favored raising interest rates at their June meeting when they wrapped up their last meeting in April, according to an account of the central bank’s April monetary policy meeting published Wednesday.
Minutes from the meeting released by the Fed said that “most” participants judged that “it likely would be appropriate” to raise rates in June if job growth continued and economic growth picked up in the second quarter after a slow start to the year.
The passage was, for the Fed, a relatively direct advisory to investors that officials are seriously considering a rate hike in June, a possibility that markets in recent weeks have all but ruled out in guessing at the central bank’s intentions.
Stocks fell immediately following the release of the minutes, and futures prices reflected investors assigning a higher probability to a rate hike following the June meeting, scheduled to wrap up on the 15th of the month.
Following the April meeting, investors became less convinced that the Fed will raise rates multiple times this year and discounted the possibility of the central bank raising its target in June.
They had been warned, however, not to totally write off the possibility.
Speaking in Washington Tuesday, the presidents of the San Francisco and Atlanta regional Federal Reserve banks both suggested that the June meeting would be a “live” one, meaning that the Fed could announce an increase.
And some at the Fed have grown concerned in recent weeks that market expectations of the Fed’s plans for monetary policy have drifted apart from Fed members’ own intentions, going so far as to issue warnings to investors that they may be wrong.
The minutes released Wednesday revealed that some unspecified number of Fed officials were worried about markets misunderstanding them. “Some participants were concerned that market participants may not have properly assessed the likelihood of an increase in the target range at the June meeting, and they emphasized the importance of communicating clearly” their plans before June.
The Fed has not changed its short-term interest rate target since December, when it raised it to between 0.25-0.5 percent. That was the first rate hike since 2006 and the first time rates above zero were targeted since late 2008.
At issue is not just another 0.25 percent rate hike to 0.75 percent, but also the number of subsequent hikes over the next few years.
The Fed’s short-term interest rate target affects interest rates throughout the economy, including on business loans and on consumer products such as credit cards and mortgages.
