1. FED MEETING MINUTES
• Minutes from the FOMC’s May 2-3 policy meeting showed that central bank policymakers were split on
the decision to continue raising interest rates or pause increases during its most recent vote.
• Ultimately, the decision to raise rates by 25 basis points in May was unanimous. However, the minutes
signal that officials are taking an increasingly balanced approach to fighting inflation as their tightening
efforts gradually show their impact on the US economy.
• While some officials have signaled openness to a pause, most have also reiterated that the committee is
not “done” in its fight against inflation, and their decisions remain data dependent. Other officials remain
aggressive in stamping out recent price pressures, believing that rate hikes should continue to anchor
future inflation expectations.
• According to the Chicago Mercantile Exchange’s Fed Watch Tool, there is a 66% chance that the Fed will
pause rate hikes at its June policy meeting.
2. DEBT CEILING NEGOTIATIONS
• President Biden and House Republicans appear to be inching closer to a bipartisan deal to avert a looming
debt-ceiling limit, according to senior aides from the White House and Speaker Kevin McCarthy.
• Talks have intensified in recent days as a projected early-June fiscal cliff approaches, and a deal that
satisfies both sides of the aisle remains elusive.
• The Treasury Department estimates that the US could run out of money as soon as June 1st, which
economists warn could potentially upend the global financial system and send the economy into recession.
• On May 24th, Fitch, a rating agency, placed the US Government’s “AAA” credit rating on negative watch,
signaling that partisan disputes have threatened the standing of US creditworthiness.
• House Republicans are seeking significant cuts to discretionary spending before agreeing to raise the
debt limit. The White House and Congressional Democrats initially looked to pass a clean increase without
cuts but recently agreed to freeze spending at current levels for the following year.
• It is expected that both sides will need to compromise to pass legislation through the Republican controlled House and Democrat-controlled Senate.
