Fed rate hike likely at June FOMC meeting followed by a "pause"

Based on the available information, it appears that the Fed is quite likely to raise the fed funds target interest rate by a quarter point to 5.25% at the FOMC meeting at the end of this month. The Fed is also likely to "pause" after this hike. It is rather unlikely that we would see a further hike to 5.50% in August, although a lot of people who should know better will continue to chatter as iff such a hike were likely.

Although recent inflation data has not been so benign, the effects of energy and commodity price hikes earlier in the year are likely to moderate and dissipate somewhat in the coming months, giving the Fed a little breathing room, for now.

Fed funds futures prices indicate a hike in June and a moderate chance of a hike in August. As always, the last hike indicated by futures prices (i.e., the hint of a hike in August) is usually an insurance hedge rather than an outright bet.

The economy is hanging in there nicely, neither booming nor busting. Goldilocks would be proud of the Fed.

-- Jack Krupansky