Hike Fed Funds Rate Could Come as Early as June: Apollo Chief Economist
In a recent interview, the Chief Economist at Apollo, Gary Shilling, shed light on the possibility of a rate hike by the Federal Reserve (Fed) as early as June. With the US economy enjoying a robust recovery and inflation showing signs of discomfort, the markets are eagerly anticipating a move by the Fed.
Shilling, a renowned economist, emphasized that the growing concerns over inflation, particularly in the context of rising wages and a strengthening job market, may prompt the Fed to take action sooner rather than later. He noted that the current interest rate environment, which has held steady at 1.75% to 2% since the last rate hike in December 2018, may no longer be suitable given the current economic landscape.
"Given the strong labor market and rising inflation expectations, I think the Fed will need to act to keep the economy from overheating and to prevent a surge in inflation," Shilling stated. "June is definitely a possible timing for the next rate hike, and it’s not out of the question that we might see more than one rate hike this year."
Shilling’s warning echoes concerns expressed by other prominent economists, including former Fed Chair Janet Yellen, who recently cautioned that the US economy could be at risk of overheating. The latest inflation data has supported these concerns, with the core Personal Consumption Expenditures (PCE) index, the Fed’s preferred inflation gauge, reaching its highest level since 2012.
Furthermore, the labor market has shown signs of continued strength, with the jobless rate hovering around 3.6%, near the lowest level since 1969. Wage growth, a key indicator of inflation, has also been rising steadily, reaching its highest level since 2009.
While a rate hike would likely be viewed as a positive by many investors, who believe that higher interest rates would curb excessive speculation and speculative activity in the markets, it could also have adverse effects on the economy, such as increased borrowing costs and reduced consumer spending.
The timing and pace of any rate hike would depend on various factors, including the Fed’s inflation target and the overall health of the economy. While a June rate hike is possible, the exact timing and nature of any move would depend on the Fed’s assessment of the economy, inflation, and other market indicators.
In conclusion, with increasing concerns over inflation and a robust job market, the possibility of a rate hike as early as June is a growing likelihood. While the markets will continue to closely monitor the Fed’s actions, investors would do well to stay vigilant and adapt to the changing economic landscape.
