The Fed kept interest rates on hold at its meeting last Wednesday, but the language in its official statement means the door is “ajar” for a June hike, Pimco global strategic advisor Richard Clarida said.
According to Mr Clarida, the FOMC statement has created the possibility of a June rate hike by omitting language from the previous statement in March that said “global economic and financial developments continue to pose risks”.
“However, [the] statement does add cautionary language noting that the Fed will closely monitor ‘global economic and financial developments’ along with the inflation indicators mentioned in past statements,” he said.
“The FOMC acknowledges the obvious that ‘labour market conditions have improved further’ even as ‘growth appears to have slowed’.”
On the whole, Mr Clarida said the FOMC appears to be “relieved” that the global outlook seems more secure than it did earlier in the year.
“Even the most dovish voting members, such as Eric Rosengren, likely want to hike at least a couple of times in 2016,” he said.
However, Mr Clarida warned that the committee members are not completely convinced about the US outlook.
“Economic growth is one important factor behind that door to June being just ever so slightly open,” he said.
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