Officials of Fed grow more doubtful about stopping interest rate increases.

Senior officials at the Federal Reserve are engaged in a debate about whether to resume rate hikes at the Fed’s next meeting or to pause. Some officials are concerned that inflation has not cooled fast enough, and the June meeting of policymakers could lead to an 11th straight rate hike. In contrast, others see room to suspend lending. Fed Chairman Jerome Powell said that although there remains uncertainty, Wall Street has interpreted his statement to mean a pause is likely.

Earlier this month, Fed officials unanimously voted to raise the benchmark lending rate by a quarter of a percentage point to a range of 5% to 5.25%, signaling a possible pause in the future. The Fed has launched its most aggressive rate-hike campaign since the 1980s to combat stubborn inflation. While inflation has eased in recent months, some officials have questioned whether the economy is headed for 2% inflation.

The Fed’s top priority remains fighting inflation, even after three banks collapsed in the past few months when interest rates rose rapidly. Although Fed officials have described the sector as still “healthy and resilient,” the volatility in the banking sector has put credit conditions under some strain.

There are concerns that slowing investment could effectively do the same thing as raising interest rates. The impact of last year’s 500-basis-point rate remains significant and needs more attention, according to Chicago Fed President, Austan Goolsby.

The Fed is attempting to keep inflation in check by curbing demand, and a strong labor market is stimulating consumer spending. However, this is creating a concern that labor market slack is likely to be a key driver of inflation going forward. This data measuring the job market is due out in the coming weeks, and the CPI report in June will give officials more insight into the trajectory of inflation and the economy as a whole.

Despite the ongoing debate, Fed officials have resisted taking an absolute stance on how the Fed votes, often saying their views on interest rates depend largely on the economic data. Fed Chair Powell has indicated that communications about future monetary policy actions “could come at a cost of misleading and limit flexibility.”

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