Fed Chair Jerome Powell repeated his upbeat comments today. He said the US is experiencing “a remarkably positive set of economic circumstances, and we’re working hard to try to sustain the expansion and keep unemployment low and keep inflation right on target”. And, “there’s really no reason to think that this cycle can’t continue for quite some time.” On interest rates, he said they are “still accommodative” and “we’re gradually moving to a place where they’ll be neutral.” He added that “we may go past neutral. But we’re a long way from neutral at this point, probably.”

Other comments from Fed officials were generally hawkish. Chicago Fed President Charles Evans said “getting policy up to a slightly restrictive setting — 3, 3.25 percent — would be consistent with the strong economy and good inflation that we are looking at.”

Philadelphia Fed President Patrick Harker said he preferred Fed’s rate hike schedule to avoid inverting the yield curve and “it’s just a question of timing”. He added there is no need to “rush the normalization process”. For now his forecasts are “”three this year, two next year, two year after.”

Cleveland Fed President Loretta Mester said she supported a gradual pace of hiking. But she also noted that “if we end up having inflation move high up” or if it goes too much above target, “then we need to move policy faster.”

Richmond Fed President Tom Barkin said “growth is solid, unemployment is low, and inflation is at target”. He didn’t touch directly on monetary policy but struck a tone of caution on flattening yield curve which “could suggest markets are losing confidence in the outlook.”

Chicago Fed President Charles Evans said yesterday that inflation has to “cross over, beyond 2%, with some momentum”. He’d be “quite pleased” if Fed could get core inflation up to “2.5%” for a time.

He expects inflation to “slowly improve, reaching 2% on a persistent basis in 2023 and then moderately overshooting 2% over the following few years”. He didn’t expect unemployment to come back to 4% until 2023.

“My forecast assumes that additional federal fiscal policy actions are coming,” Evans added. “Without adequate fiscal support before too long, I am concerned that recessionary dynamics will gain more traction and lead to a slower trajectory back to maximum employment.”

Comments from top officials from Fed suggested a pause in interest rate hikes in June while possible, shouldn’t be misinterpreted as a sign that peak rates for the cycle have been reached.

Fed Governor, Philip Jefferson, clarified, “A decision to hold our policy rate constant at a coming meeting should not be interpreted to mean that we have reached the peak rate for this cycle.”

Jefferson, suggested that skipping a rate hike at an upcoming meeting would provide an opportunity for the committee to review more data before deciding on the extent of any further policy tightening.

Philadelphia Fed President, Patrick Harker, echoed this sentiment, albeit with a more forceful argument for the need to ‘skip’ rather than ‘pause’. “I am in a camp increasingly coming into this meeting of thinking that we really should skip, not pause,” he remarked.

Harker believes the current policy is nearing, if not already at, a restrictive level and suggests a period of careful reflection before further action is taken.

Harker added, “I think we have to be ready that we might have to do more and I’m fully aware we have to do that and willing to do that, but I want to give it a little bit of time.”