The US Federal Reserve (Fed) decided to hike interest rates moderately by a quarter of a point on Wednesday, as expected, still concerned about inflation and despite the turmoil in the banking sector, the risks of which are weighing on the economy.
• Also read: Global markets await Fed decision
The decision was made unanimously. The Fed’s interest rate is now in a range of 4.75% to 5.00%, the highest level since 2006, and the institution is planning further rate hikes. The Fed expects slightly higher inflation this year from December’s 3.6% vs. 3.5%, but slightly weaker GDP growth of 0.4% vs. 0.5%.
The Fed warned after its meeting that the recent banking crisis is “likely (…) to weigh on economic activity, hiring rates and inflation,” stressing that “the extent of these impacts is uncertain.
The powerful institution, which raised interest rates by a quarter of a point on Wednesday, also reiterated in its press release that “the US banking system is sound and resilient” and that its monetary policy committee is “watchful for inflationary risks.” .
A statement from the bank and economic forecasts from officials suggest the end of rate hikes is near.
The Fed expects slightly stronger-than-expected inflation of 3.6% in 2023 vs. 3.5% (press release), but adds that the banking turmoil is “likely” to weigh on the economy, jobs and inflation.