Fed Hikes Interest Rate 25bp
The Federal Reserve raised the target range for its benchmark interest rate by 0.25% on Wednesday while leaving its options open on future rate hikes. The central bank’s move pushed its benchmark policy rate, the fed funds rate, to a new range of 5%-5.25%, the highest since September 2007.
The Fed said future rate hikes would be contingent on the impact of previous rate hikes on the economy and financial developments. Fed officials still view inflation as elevated, and note that they remain “highly attentive” to inflation risks.
As part of its most aggressive rate hiking campaign since the 1980s, the US central bank has increased the target range for its benchmark interest rate by 5 percentage points since March 2022. Wednesday’s decision was unanimous among voting members of the Federal Open Market Committee (FOMC), the Fed committee that decides on policy.
Fed Chair Jay Powell began his press conference on Wednesday with a discussion of the latest developments in the ongoing bank crisis, which last week saw the FDIC broker a sale of First Republic (FRC) to JPMorgan (JPM).
Powell said “Conditions in that sector have broadly improved since early March, and the US banking system is sound and resilient.”
At least twice during Wednesday’s press conference, Powell pointed to the “meaningful” change in the Fed’s statement that swapped in language about the Fed determining “the extent to which” it may need to raise rates; previously, the Fed said it had “anticipated” future rate hikes.
Still, Powell sought to maintain flexibility on future policy decisions, saying: “A decision on a pause was not made today.” Powell did say that among members of the FOMC “there’s a sense that we’re…much closer to the end of this than the beginning.” #Fed Hikes Interest Rate 25bp