Fed raises rates for the tenth time to curb US inflation.

The United States Federal Reserve (Fed) raised its main official interest rate by a quarter of a percentage point on Wednesday for the tenth consecutive time since March 2022, to curb inflation despite signs of a slowdown in the economy and the recent banking crisis. .

The unanimous decision raised the US central bank’s benchmark overnight interest rate to the range of 5.00% to 5.25%, the Fed’s 10th straight hike since March 2022.

Although it was initially thought that the Federal Reserve could pause to allow time to assess the consequences of the recent bank failures, await the resolution of a political standoff over the US debt limit, and watch the course of inflation, Fed Chairman Jerome Powell, He denied today that interest rate rises are going to pause due to the events that have occurred in recent weeks in the US banking system.

The Federal Reserve did not decide to pause raising interest rates but will have a “data-driven approach”, informed the president of the entity on Wednesday, in a press conference. ”No decision was made today to pause.” he pointed. Regarding future decisions on interest rates, he stressed that “We will make the decision on a meeting-by-meeting basis and based on the totality of future data.”

What did the statement say?

In the monetary policy statement that accompanied the decision, the reference to the fact that the Federal Open Market Committee, in charge of setting interest rates, still “anticipates that additional monetary policy tightening may be appropriate in order to achieve a tight enough monetary policy stance to return inflation to 2% over time”.

Instead, the fed inserted more nuanced text, reminiscent of the language used when he halted rate hikes in 2006, saying that “to determine the extent to which further tightening of monetary policy may be appropriate”, officials will study how the economy, inflation and financial markets behave in the coming weeks and months.

The new tone does not guarantee that the Federal Reserve will keep rates stable at its next meeting in June, and the statement notes that “inflation remains high” and employment continues “growing at a robust pace”.

Yet the Federal Reserve’s key interest rate is virtually the same as it was on the eve of the destabilizing financial crisis 16 years ago, and stands at the level most members estimated in March it would be.restrictive enough” for inflation to return to its target.

Currently the price hike is still more than double the target.

Economic growth remains modest, but “Recent events are likely to result in a tightening of credit conditions for households and businesses and weigh on economic activity, hiring and inflationthe Fed said.

The risks surrounding the recent bankruptcies of several US banks and the debt limit showdown between Republicans in Congress and Democratic Chairman Joe Biden have added to the feeling of caution from the Fed as it tries to tighten up. even more financial conditions.

Fed Chairman Jerome Powell will hold a press conference at 1830 GMT to explain the results of the latest two-day policy meeting.

Source: Reuters