Fed minutes: Rate hike should be expected in June – Deutsche Bank

Analysts at Deutsche Bank suggest that the slightly dovish Fed minutes indicated that a further rate hike should be expected in June but that the Committee is not in a rush to clearly signal a more hawkish trajectory at this juncture.

Key Quotes

“In the details, the minutes noted that “most participants judged that….it would likely soon be appropriate…to take another step in removing policy accommodation”. On balance, the minutes didn’t seemed to be too concerned about an overheating economy and inflation over shooting. It noted that a temporary period of inflation “modestly above 2% would be consistent with the committee’s symmetric inflation objective…” and that “it was premature to conclude that inflation would remain at levels around 2%....”

“On the labour market, the minutes noted the Employment cost index for 1Q indicated the strength in the labour market was “…showing through to a gradual pickup in wage increases, although the signal from other wage measures was less clear.” while many participants commented that overall wage pressures were still moderate or were strong only in industries and occupations…” Overall, given our economists’ expectations for the ongoing tightening of the labour market, they still expect three more hikes this year.”