The Fed will likely announce another interest rate hike tomorrow. The huge question is what officials may signal about another potential tightening on June 14.

Why it matters: Financial markets largely anticipate that tomorrow's expected hike would be the last of the cycle. But chair Jerome Powell may not confirm or deny that assumption.

Why there might be another hike: Inflation remains sticky, the labor market is cooling but still hot, and the economy is resilient.

• If inflation or job indicators surprise to the upside — that is, come in hotter than expected — that might push officials to consider another rate hike next month.

Why there might not be another hike: The banking crisis (back in the headlines with the failure of First Republic) shows how the Fed's previous actions continue to ripple through the economy — setting up the case for a pause.

• Adding to reasons for caution: new projections from the Treasury Department that show lawmakers may have less than a month to reach a debt-ceiling deal before the nation defaults on its debt.

What they're saying: "The Fed wants the option to make May the last hike, and it also wants the option to hike in June," Employ America's Skanda Amarnath wrote in a note.

• "I think the Fed is still not really certain whether the banking crisis will cause an outsize tightening of credit conditions" that would help their inflation battle, says Jan Groen, chief U.S. macro strategist at TD Securities.

Flashback: Back in June 2006, the Fed — led by then-chair Ben Bernanke — was ready to signal that it could pause the rate-hiking cycle that had begun two years earlier.

• But inflation risks remained, so officials also wanted the option to pursue additional rate hikes, if those risks flared up.
• "[I]t seems to me that we want to strike some sort of balance between the possibility ... that we ought to increase the funds rate further, perhaps even more than once at subsequent meetings, with the possibility that we may also find it appropriate to pause," said then-Minneapolis Fed president Gary Stern, according to a transcript of that policy meeting.
• That sentiment was ultimately reflected in the Fed's policy statement — parsed closely by traders and economists — which added the "extent and timing of any additional firming" to address inflation risks would depend on incoming data.
• Wall Street economists, including those at UBS and Goldman Sachs, said they anticipate the Fed will follow a similar playbook.

What to watch: Ultimately, the 2006 hike did end up being the final one of the cycle. The financial crisis soon followed, and the Fed pivoted to slashing rates.

• Financial markets expect the Fed will begin cutting rates as early as the fall, which Powell has previously pushed back on. He's likely to continue to do so tomorrow.

Employers continue to scale back demand for workers, while quit rates declined and layoffs ticked up — two signs that the labor market may be loosening up.

Driving the news: Job openings declined for the third straight month, with vacancies dropping to 9.6 million in March — 384,000 fewer postings than in February, the Labor Department said this morning in its monthly Job Openings and Labor Turnover Survey.

• Quits are retreating to the levels seen pre-pandemic. The quit rate among private sector workers was 2.7% in March, down from its 3.3% peak in April of last year, and almost back to the 2.6% seen in January 2020.
• High quits are a sign of confidence among workers about the prospects of finding another job with (likely) higher pay, economists say. The slowdown in quitting may be beginning to signal the opposite.

What to watch: The number of layoffs increased by 1.8 million in March, edging up to pre-pandemic levels.

• Among the sectors that saw the sharpest jump in layoffs: construction, where layoffs jumped by 112,0000.

The bottom line: There were 1.6 open jobs for every unemployed worker in America in March — a ratio that has eased in recent months but remains higher than at any time before the pandemic.