Commentary
Most investors and Wall Street research analysts believe the Federal Reserve will pause its hikes, keeping the benchmark interest rate unchanged, in June and that a rate cut is likely later in the year.
Just take one look at the yield curve. It is still inverted with the one-month rate higher than the six-month or 12-month rate. With the banking industry still reeling from several regional bank failures, the financial system appears to be fragile and a rate pause would be prudent.
But they may be underestimating the risk of still higher rates.
Fed officials in their May meeting laid the groundwork for a rate pause in June but stopped short of committing to it. That has convinced investors that a pause is coming, but economic data and some experts suggest that rate hikes are still necessary, and the central bank may enact another 25-basis point increase in June….