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Well, wrong again, as usual. I thought that Powell might pass on an immediate rate hike, but he did in fact go with the 0.25% as most of you folks predicted. Maybe I should send my brain back to the factory for an upgrade.
WASHINGTON (AP) — The Federal Reserve extended its year-long fight against high inflation Wednesday by raising its key interest rate by a quarter-point despite concerns that higher borrowing rates could worsen the turmoil that has gripped the banking system.
“The U.S. banking system is sound and resilient,” the Fed said in a statement after its latest policy meeting ended. At the same time, the Fed warned that the financial upheaval stemming from the collapse of two major banks is “likely to result in tighter credit conditions” and “weigh on economic activity, hiring and inflation.”
The central bank also signaled that it’s likely nearing the end of its aggressive streak of rate hikes. In its statement, it removed language that had previously said it would keep raising rates at upcoming meetings. The statement now says “some additional policy firming may be appropriate” — a weaker commitment to future hikes.
The Fed included some language that indicated its inflation fight remains far from complete. It noted that hiring is “running at a robust pace” and “inflation remains elevated.” It removed a phrase, “inflation has eased somewhat,” that it had included in its statement in February.
Speaking at a news conference Wednesday, Chair Jerome Powell said, “The process of getting inflation back down to 2% has a long way to go and is likely to be bumpy.”
The latest rate hike suggests that Powell is confident that the Fed can manage a dual challenge: Cool still-high inflation through higher loan rates while defusing turmoil in the banking sector through emergency lending programs and the Biden administration’s decision to cover uninsured deposits at the two failed banks.
The central bank’s benchmark short-term rate has now reached its highest level in 16 years. The new level will likely lead to higher costs for many loans, from mortgages and auto purchases to credit cards and corporate borrowing. The succession of Fed rate hikes have also heightened the risk of a recession.
The troubles that suddenly erupted in the banking sector two weeks ago likely led to the Fed’s decision to raise its benchmark rate by a quarter-point rather than a half-point. Some economists have cautioned that even a modest quarter-point rise in the Fed’s key rate, on top of its previous hikes, could imperil weaker banks whose nervous customers may decide to withdraw significant deposits.
The above was excerpted from a current Associated Press article, and has been edited for brevity.
As I am retired and threw my back out yesterday chain sawing I listened to entire press conference.
Hiked 0.25% but gee he could not predict if the turmoil in banks would lead to tighter lending and there fore make recession more likely and rate cuts sooner.
Incredibly wide range of expected federal funds rate at end of 2023 5% to 2%
Impressive performance, but reporters were complaining it was "Dull". Sorta speaks to their priorities. Calm cool and reasoned discussions don't sell papers.
They quickly changed focus to Yellen who apparently said she did not believe every bank should be bailed out
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https://twitter.com/YBB_Finance/status/1638534755909095426?t=mTwIXnpP7Nle6L9btQzT2Q&s=19
Hiked 0.25% but gee he could not predict if the turmoil in banks would lead to tighter lending and there fore make recession more likely and rate cuts sooner.
Incredibly wide range of expected federal funds rate at end of 2023 5% to 2%
Impressive performance, but reporters were complaining it was "Dull". Sorta speaks to their priorities. Calm cool and reasoned discussions don't sell papers.
They quickly changed focus to Yellen who apparently said she did not believe every bank should be bailed out
Regional Banks crashed
Another day in the big city