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HomeLatest NewsFed raises rates by a quarter point despite turmoil at banks

Fed raises rates by a quarter point despite turmoil at banks

Date: June 3, 2023 Time: 23:25:24

The Federal Reserve (Fed) has decided to raise interest rates by a quarter of a percentage point, to the 4.75%-5% range, expressing caution about the recent banking crisis and indicating that the increases are coming to an end but without ruling out another move. in May. In fact, the Fed projections accompanying the decision point to another rise of another quarter point, to the 5%-5.25% range. It is the ninth increase since March 2022, although this time, the Federal Open Market Committee (FOMC) that sets the rates indicated that future movements will arise from incoming data and the possibility of raising again in six weeks is saved.

“The Committee will closely monitor the incoming information and assess the implications for monetary policy. The Committee anticipates that additional policy tightening may be appropriate to achieve a monetary policy stance that is tight enough to return inflation to 2 percent over time.

The Fed softens its tone in the statement by not considering new rate hikes as safe interests, but maintains its determination to continue reducing its balance sheet by selling or not reinvesting its current portfolio of bonds and mortgage securities, despite recent injections of liquidity to the banks due to the crisis of confidence caused by the bankruptcy of several of them.

The central bank has once again had words of support for the sector after two weeks of crisis and high tension for financial institutions. “The US banking system is strong and resilient. Recent developments are likely to result in tighter credit conditions for households and businesses and weigh on economic activity, hiring and inflation. The extent of these effects is uncertain” , he explains in his statement. “The Committee remains very attentive to inflation risks,” he adds.

Rate cuts for 2024

For 2024, the Fed projections forecast that rates will fall to around 4.1%, almost 100 basis points below their peak in 2023, also unchanged from their December estimate. The so-called dot diagram with which the central bank accompanies its decision points to economic growth of 0.4% in 023, 1.2% in 2024 and 1.9% in 2025, once again erasing the scenario of economic recession. In U.S.A.

The unemployment rate, however, will grow strongly this year to 4.5% from the 3.6% it stood at last February. Inflation according to the indicator 2.1% in 2025.

Puck Henry
Puck Henry
Puck Henry is an editor for ePrimefeed covering all types of news.

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