Fed Raises Interest Rates to 16-Year High
Washington, DC, May 4, 2023-"Federal Reserve officials signaled they might be done raising interest rates for now after approving another increase at their meeting that concluded Wednesday,” reports the Wall Street Journal.
“‘People did talk about pausing, but not so much at this meeting,’ Fed Chair Jerome Powell said at a news conference. ‘We feel like we’re getting closer or maybe even there.’
“The unanimous decision marked the Fed’s tenth consecutive rate increase aimed at battling inflation and brings its benchmark federal-funds rate to a range between 5% and 5.25%, a 16-year high.
“With the latest increase, the Fed has raised its benchmark federal-funds rate by a cumulative 5 percentage points from near zero in March 2022, the most rapid series of increases since the 1980s. The rate influences other rates throughout the economy, such as on mortgages, credit cards and business loans.
“‘I think that policy is tight,’ Mr. Powell said. But he added, ‘we are prepared to do more if greater monetary policy restraint is warranted.’
“Until now, officials have been looking for clear signs of a slowdown to justify ending rate increases. But Mr. Powell indicated that calculation could shift now, and officials would need to see signs of stronger-than-expected growth, hiring and inflation to continue raising rates. The Fed’s next meeting is June 13-14.
“The Fed fights inflation by slowing the economy through lifting rates, which causes tighter financial conditions such as higher borrowing costs, lower stock prices and a stronger dollar. Banking stresses are expected to further tighten financial conditions, but the magnitude of any credit crunch is hard to predict and might not be apparent for months.
“‘We have a broad understanding of monetary policy. Credit tightening is a different thing,’ Mr. Powell said.”