Fed Says It May Hike Rates In June, But Will It Actually Follow Through?
U.S. equity markets were highly volatile Wednesday afternoon after the Federal Reserve released the minutes from its April policy meeting.
The Fed said it will likely hike interest rates in June should economic data points continue to remain strong.
"Most participants judged that if incoming data were consistent with economic growth picking up in the second quarter, labor markets continued to strengthen, and inflation making progress toward the committee's 2 percent objective, then it likely would be appropriate for the committee to increase the target range for the federal funds rate in June," the Fed said in its minutes.
The Dow Jones Industrial Average bounced off its intra-day high of 17,636 following the minutes and dipped below the 17,450 mark before rebounding to the 17,500 level.
Similarly, the Financial Select Sector SPDR Fund (NYSE: XLF) bounced off its intra-day high of $23.28 to trade near the $23.00 level - only to fully rebound.
Mohamed El-Erian, Allianz's chief economist told Benzinga in an e-mail that the markets have been "under-estimating" the likelihood of an early Fed rate hike. He added that Fed officials have now "confirmed that they have been worried about this."
Joe Brusuelas, an economist for RSM, also told Benzinga that the market's reaction to the Fed's minutes "was more hawkish than the text" appears to be.
"Of interest was the committee felt comfortable enough to to note that risks to the outlook is balanced so one cannot rule out a June rate hike should employment and consumption data continue to demonstrate strength," he said.
However, he added that global financial risks surrounding the June 23 "Brexit" vote is "sufficient" to force the Fed's policy makers to delay any rate hike until September at the earliest.
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