The Federal Reserve on Wednesday, despite the threat of a recession later this year, voted unanimously to increase interest rates by an additional 0.25 percentage points in an effort to combat inflation, according to The Hill’s Tobias Burns.
The Federal Open Market Committee (FOMC), the Fed’s rate-setting committee, agreed to boost interest rates to a range of 5 percent to 5.25 percent. It is the Fed’s 10th consecutive rate hike since March 2022, pushing rates to their highest level in 16 years.
In the face of a fracturing financial sector — the collapsing of Signature Bank, Silicon Valley Bank and First Republic Bank — and the public’s fear of financial instability, the Fed sought to assuage concerns.
“The U.S. banking system is sound and resilient,” the FOMC said while also acknowledging that “tighter credit conditions for households and businesses are likely to weigh on economic activity, hiring, and inflation. The extent of these effects remains uncertain.”
Inflation has slowly decreased since last summer, with the annual inflation rate dropping to 5 percent in March 2023, and the broader economy as a whole has cooled.
It’s unclear what the Fed plans to do at its next meeting in June, with Chair Jerome Powell suggesting the Fed has yet to decide whether to suspend its rate hikes. Powell said the Fed would make that decision based upon the latest economic data.
“Inflation pressures continue to run high, and the process of getting inflation back down to 2% has a long way to go,” Powell said.
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