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THE BIZNOB – Global Business & Financial News – A Business Journal – Focus On Business Leaders, Technology – Enterpeneurship – Finance – Economy – Politics & LifestyleTHE BIZNOB – Global Business & Financial News – A Business Journal – Focus On Business Leaders, Technology – Enterpeneurship – Finance – Economy – Politics & Lifestyle

Breaking News

Breaking News

Fed hikes rates, opens door to tightening cycle stop

Federal Reserve Chairman Jerome Powell arrives to hold a news conference after the release of U.S. F... Federal Reserve Chairman Jerome Powell arrives to hold a news conference after the release of U.S. Fed policy decision on interest rates, in Washington, U.S, May 3, 2023. REUTERS/Kevin Lamarque
Federal Reserve Chairman Jerome Powell arrives to hold a news conference after the release of U.S. F... Federal Reserve Chairman Jerome Powell arrives to hold a news conference after the release of U.S. Fed policy decision on interest rates, in Washington, U.S, May 3, 2023. REUTERS/Kevin Lamarque

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Fed hikes rates, opens the door to tightening cycle stop. The Federal Reserve’s handling of the post-pandemic economic recovery entered a new chapter on Wednesday with what may be the last in a record run of interest rate rises and increased attention to credit and other economic concerns.

The U.S. central bank lifted its benchmark overnight interest rate by a quarter of a percentage point to the 5.00%-5.25% range, as predicted by financial markets, but removed language from its policy statement suggesting it “anticipates” more rate hikes.

The change doesn’t preclude the central bank’s policy-setting committee from hiking rates again in June. Still, Fed Chair Jerome Powell said it was now an open question whether further increases were warranted in an economy with high inflation, signs of a slowdown, and risks of a bank credit crackdown.

“We’re closer, or maybe even there,” Powell said of the end-point of rate increases that have raised the Fed’s policy rate by five percentage points in 10 meetings since March 2022, a torrid pace for the central bank that may now warrant allowing some time for the impact to be felt.

The Fed added that “in determining the extent to which additional policy firming may be appropriate,” members would consider how monetary policy was building in the economy, reminiscent of its 2006 tightening cycle.

In the aftermath of increased interest rates and the collapse of three U.S. banks, Fed policymakers are concerned about inflation and credit tightening.

At a press conference after the statement, Powell said inflation remains the main concern and that it is too soon to say the rate-hike cycle is over.

“We are prepared to do more” and will make policy choices “meeting-by-meeting” from June onward.

He also doubted the Federal Open Market Committee would decrease rates this year.

“We on the committee have a view that inflation is going to come down not so quickly, it will take some time,” he told reporters. “In that world, if that forecast is broadly right, it would not be appropriate to cut rates” this year.

 


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