Fed expected to leave benchmark rate unchanged at June meeting. Is that risky?

The Federal Reserve’s Open Market Committee meets Tuesday and Wednesday for its fourth interest rate setting meeting of the year.

It will be the fourth meeting of 2024 at which we can say, with almost total certainty, the Fed will leave its benchmark Federal Funds Rate unchanged at 5.25% to 5.5% — the same high level it’s maintained to fight inflation since July of last year.

Recent news on the job market isn’t likely to change the thinking at the Fed too. The May jobs report was a mixed bag: strong job growth coupled with higher unemployment. 

That won’t dissuade the Fed from staying the course though, per BNP Paribas economist Yelena Shulyatyeva.

“Even if we have some yellow flags, the Fed will take this as a sign that they can remain patient to really ensure inflation is getting to the place where they want it to be,” she said.

There are signs that high rates are starting to hobble economic growth, noted Joe Brusuelas at consulting firm RSM.

“I am concerned that the Fed will overdo it, keep rates just so high that elevated financing costs,” he said, “which are now beginning to really bite on consumers, spill over into the broader business sector.”

There is an upside to high interest rates — a stronger dollar, which will go further, say, “in Paris,” Brusuelas said.

Which is where Brusuelas will be watching the Olympics — and commenting on the July jobs report — this summer.