By 25 basis points or one-fourth of a percentage point, the Federal Reserve increased interest rates. With this change, the benchmark funds rate is within the 4% to 5% range. Jerome Powell, the chair of the Fed, assured the public that the Fed will use “all of our tools” to maintain the banking system’s safety in the wake of recent turmoil for regional banks.
CNBC
Financial conditions have tightened more than the market indicates:
More than in the U.S., economic conditions have gotten tighter. S. benchmark indices suggest, Federal Reserve Chair Jerome Powell said at a press conference on Wednesday.
When asked what financial situation would justify a reduction in interest rates, mainly if credit conditions were to become even tighter, Powell responded, “The traditional indexes are focused a lot on rates and equities, and they don’t necessarily capture lending conditions.”. With the banking crisis, worries about a credit crunch—which happens when banks significantly tighten their lending standards—have increased.
Powell acknowledged that if tighter lending conditions persisted, they could easily have a significant macroeconomic impact and would be considered by the Fed when making policy decisions.
He continued, “Rate cuts are not in our base case, so the question for us is how significant will that be, how great would it be, and how long would it last. “.
On Wednesday, the US Federal Reserve chose to raise key interest rates by a quarter of a percentage point in its most recent policy statement. The federal funds rate is now anywhere between 4.75% and 5%. But, in light of the recent financial sector turbulence caused by the demise of two banks, the Fed has signalled a pause in additional rate hikes. According to the FOMC, the American banking system is stable and resilient.
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