In line with expectations, the Federal Reserve raised interest rates by a 25bps. This is the ninth increase in a year. The Fed is trying to achieve a balance in its declared war on inflation while trying to tackle the emerging banking crisis.
This increase has lifted rates to a range of 4.75 to 5 %. Last month the Fed had also raised rates by 25bpd.
The Fed Chairman did concede that the Fed “considered” pausing interest rates because of the banking problems, but said that the economic data had been strong, that forced the central bank to raise the fund rates.
If tighter lending conditions are sustained, Powell acknowledged that could easily have a significant macroeconomic impact which would be factored into the Fed’s policy decisions.
US stocks initially rose on the Fed announcement but later closed in loss. Dow Jones lost 530 points closing at 32,030 down 1.63%.
Federal Reserve FOMC statement
See the history of Federal Fund Rate in this chart:
