IS IT A 'SKIP' OR A 'PAUSE'? FEDERAL RESERVE WON'T LIKELY RAISE RATES NEXT WEEK BUT MAYBE NEXT MONTH
Techlife News|Techlife News #606
Don't call it a "pause."
IS IT A 'SKIP' OR A 'PAUSE'? FEDERAL RESERVE WON'T LIKELY RAISE RATES NEXT WEEK BUT MAYBE NEXT MONTH

When the Federal Reserve meets next week, it is widely expected to leave interest rates alone after 10 straight meetings in which it has jacked up its key rate to fight inflation.

But what might otherwise be seen as a "pause" will likely be characterized instead as a "skip." The difference? A "pause" might suggest that the Fed may not raise its benchmark rate again. A "skip" implies that it probably will just not now.

The purpose of suspending its rate hikes is to give the Fed's policymakers time to look around and assess how much higher borrowing rates are slowing inflation. Calling next week's decision a "skip" is also a way for Chair Jerome Powell to forge a consensus among an increasingly fractious committee of Fed policymakers.

One group of Fed officials would like to pause their hikes and decide, over time, whether to increase rates any further.

But a second group worries that inflation is still too high and would prefer that the Fed continue hiking at least once or twice more - beginning next week.

A "skip" serves as compromise.

When the Fed chair speaks at a news conference next week, he will likely make clear that the central bank's key rate - which has elevated the costs of mortgages, auto loans, credit card and business borrowing- may eventually go even higher.

The clearest signal that a skip, rather than a pause, is in the works will likely be seen in the quarterly economic projections. Those may show that officials expect their key rate to rise a quarter-point by year's end - to about 5.4%, above their estimate in March.

"That's probably the only way to keep the committee cohesive in an environment where they have seem to have somewhat broadening disagreements," said Matthew Luzzetti, chief U.S. economist at Deutsche Bank Securities.

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