Interest Rate Hikes by the Fed Continues

Despite recent bank turmoil, the Federal Open Market Committee (FOMC) voted unanimously to increase the key federal funds rate by 25 basis points to a target range of 4 ¾ to 5 percent; and “Fed policymakers projected that rates would end 2023 at about 5.1%”. Although the increase remains more moderate than the 50 basis point increase in mid-December and more aggressive four consecutive 75 basis point hikes going back to June 2022, the “rising borrowing costs risk worsening the bank crisis” as well as “adding to pressures that could tip the economy into recession.” The move to increase versus pause the rate hike suggests that policymakers “see rising prices — especially based on recent data — as a bigger growth threat than the bank turmoil. It also projects confidence that the economy and financial system remain healthy enough to withstand the string of bank collapse.”

Source :   https://www.federalreserve.gov/newsevents/pressreleases/monetary20230322a.htm

Source :   https://www.crainsnewyork.com/finance/fed-hikes-quarter-point-signals-it-still-expects-higher-rates