Traders Defy Fed Hawks as Half-Point Hike in July in Doubt

Reuters

Fed embraces 50-basis-point rate hikes in June, July to curb ‘very high’ inflation

All participants at the Federal Reserve’s May 3-4 policy meeting backed a half-percentage-point rate increase to combat inflation they agreed had become a key threat to the economy’s performance and was at risk of racing higher without action by the U.S. central bank, minutes of the session showed on Wednesday. This month’s 50-basis-point hike in the Fed’s benchmark overnight interest rate was the first of that size in more than 20 years, and “most participants” judged that further hikes of that magnitude would “likely be appropriate” at the Fed’s policy meetings in June and July, according to the minutes. In that context, “participants agreed that the (Federal Open Market) Committee should expeditiously move the stance of monetary policy toward a neutral posture … They also noted that a restrictive stance of policy may well become appropriate.”