Is it possible for the Fed to hike rates once more in June?

The question on everyone’s mind is whether the Federal Reserve will raise interest rates for the 11th consecutive time at their next meeting in June or if they will pause. While Wall Street seems to be betting on the latter, the consensus has been a rocky road to reach over the week.

The Fed meeting held earlier this month gave hope that rate hikes were complete, at least for now. Last week’s economic data was better than expected, with retail spending rebounding in April after two months of decline. This indicates that consumers are still spending despite tightening their purse strings. Additionally, jobless claims fell more than expected in the week that ended on May 13, falling below the historical average.

However, traders only saw a 15.5% chance of another quarter-point rate hike by the Fed in June on May 12, and that number rose to roughly 36% as of Thursday, according to the CME FedWatch Tool. However, Fed Chairman Jerome Powell’s comments on Friday morning indicating that there remains uncertainty about demand falling as a result of tighter credit conditions and delayed rate hikes, led traders to cut their odds of the central bank raising rates to about 18.6% as of Friday night.

While the experts seem to agree that the Fed is unlikely to raise rates in June, the decision is far from set. The Fed has three key considerations before making a decision, including the debt ceiling, the evolving financial landscape, and the impact of its aggressive tightening cycle on the economy. The Fed has maintained its position that its actions depend on data, and investors will have to wait for the data points on the Consumer Expenditure Price Index, May employment data, and May Consumer Price Index to be released before the Fed makes any final decisions.

In other news, James Gorman, the Chief Executive Officer of Morgan Stanley, has announced that he will resign from his position within the next 12 months. The board has planned to have three senior internal candidates ready to take over the role as the next CEO.

The June 1 ‘X-Date’ is another big date to watch, and JPMorgan Chase’s Jamie Dimon has been preparing for a possible US default through weekly ‘war rooms.’ The debt ceiling talks have stalled, which poses further challenges for the market, but House Speaker Kevin McCarthy remains optimistic about a path to a deal.

Investors should keep an eye on the upcoming events, including Investor Day at JPMorgan Chase on Monday, April new home sales on Tuesday, May Fed Minutes on Wednesday, the Second Flash of First Quarter GDP and earnings from Costco, Dollar Tree, and Best Buy on Thursday, and April consumer spending and May University of Michigan Consumer Sentiment final readings on Friday.

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