• Investing
  • Stock
Round Table Thoughts
  • Economy
  • Editor’s Pick
Home Editor's Pick Fed raises interest rates by a quarter point, keeping inflation in crosshairs
Editor's Pick

Fed raises interest rates by a quarter point, keeping inflation in crosshairs

by March 23, 2023
by March 23, 2023 0 comment
Share
0
FacebookTwitterPinterestWhatsapp

The Federal Reserve is raising its key interest rate by 0.25%, continuing on its crusade against inflation while warning that recent instability in the banking sector could weigh on the economy.

In announcing their ninth consecutive rate hike — which increases the benchmark federal funds rate to a range of 4.75% to 5% — Fed officials said in a statement Wednesday that the “U.S. banking system is sound and resilient.”

But after a series of historic collapses and rescues of lenders in the U.S. and overseas, they warned that “recent developments are likely to result in tighter credit conditions for households and businesses and to weigh on economic activity, hiring, and inflation.” That means potentially higher borrowing costs for everything from home and car loans to steeper credit card interest rates.

“The extent of these effects is uncertain,” the statement continued, sounding a note of caution over the likelihood of further rate hikes as the Fed looks to get inflation back down to its 2% target.

After jumping immediately after the decision, markets took a sharp nosedive. The Dow Jones Industrial Average closed more than 500 points lower, or about 1.6% down. The S&P 500 and NASDAQ indices also finished the day down about 1.6% apiece.

In a press conference following the announcement, Powell addressed lingering concerns around the banking sector, reassuring U.S. depositors that their funds remain safe and that the Fed continues to use all its available tools to head off more problems.

“These are not weaknesses that are at all broadly through the banking system,” Powell said in response to a question, calling circumstances around the failed Silicon Valley Bank “an outlier.”

Powell’s reassurances coincide with efforts by Treasury Secretary Janet Yellen to soothe depositors and investors rattled by the fallout. Yellen told lawmakers Wednesday that regulators would take any necessary measures to “ensure that depositors’ savings remain safe” in U.S. banks.

However, she has said that while officials could backstop more deposits to avoid a broader contagion — as they did twice recently — the federal $250,000 insurance limit remains in effect. And on Wednesday Yellen emphasized that regulators are not considering offering “blanket insurance.”

The Fed also released its quarterly round of economic projections Wednesday, which include policymakers’ forecasts on inflation and rate hikes through 2025. It now foresees inflation remaining at a higher level for 2023 than it previously expected, while the unemployment rate for the year is now forecast to rise to 4.6% from 3.6% as of last month, higher than the prior expectation of 4.4%.

The latest 12-month inflation data came in at 6% for February. That was slightly lower than January’s 6.4% level — and down from a 9% peak last summer as price pain lingers for consumers despite gradual declines.

A more detailed inflation measure the Fed has been watching, so-called supercore inflation — which reflects price increases driven by everyday services costs like haircuts or meals out — even increased slightly last month, which led many analysts over the past week to anticipate further rate hikes.

As Bankrate Chief Financial Analyst Greg McBride put it in a statement Wednesday, “Not even the second and third largest bank failures in U.S. history, or the resulting instability in U.S. and global banking, can keep the Fed from a ninth consecutive interest rate hike to corral inflation.”

That wasn’t a sure thing, though, and analysts’ expectations were unusually divided in the run-up to the decision. Some had anticipated a heftier half-point rate hike and others no increase at all. In the end, the Fed took a middle-ground approach.

One reason some Fed watchers had expected a pause: The central bank’s own actions to curb inflation have been seen as factors in the recent collapses. While the failed lenders had distinct problems, higher interest rates have ratcheted up pressure across the financial industry.

By raising its benchmark rate, the Fed sets off a chain reaction of rate increases in other parts of the economy, making it more expensive to borrow and invest and thus cooling demand for goods and services.

That is precisely the central bank’s desired outcome in its fight against inflation. After its nine consecutive increases, consumers now face higher borrowing costs in a range of places, from credit card interest rates of nearly 20% to auto loan rates of about 6.5%.

This post appeared first on NBC NEWS
You Might Also Like
  • And they’re off! On the sidelines of a pricier Derby, a race for small-dollar spending
  • Delta sues CrowdStrike after widespread IT outage that caused thousands of cancellations
  • Orange Business Supports Lucid to Deliver the Experience-driven Connected Car Across Europe
  • U.S. Steel sues Biden admin, union boss after president blocks acquisition deal
Share
0
FacebookTwitterPinterestWhatsapp

previous post
The Importance  of Proactive Hedging in Options Trading
next post
In the wake of bank meltdowns, the Fed draws accusations of lax oversight

You may also like

Stellantis could close 18 facilities under UAW deal — here...

September 19, 2023

Clorox warns cyberattack and product shortages will drag sales downward

October 11, 2023

Nvidia says Anthropic is telling ‘tall tale’ in its defense...

May 2, 2025

Elon Musk and investors offering $97.4 billion for control of...

February 11, 2025

Here’s what has driven the Dow rally to 40,000, and...

May 18, 2024

Why the LA Rams are worth $2 billion more than...

September 6, 2024

Fintech company Chime files for Nasdaq IPO

May 14, 2025

3 Reasons To Have Local IT Support For Your Tech...

January 23, 2023

‘He’s like Iron Man’: Jensen Huang lit up London Tech...

June 10, 2025

New Boeing CEO to give clues about company’s future, while...

October 23, 2024

    Stay updated with the latest news, exclusive offers, and special promotions. Sign up now and be the first to know! As a member, you'll receive curated content, insider tips, and invitations to exclusive events. Don't miss out on being part of something special.


    By opting in you agree to receive emails from us and our affiliates. Your information is secure and your privacy is protected.

    Recent Posts

    • How to Find Compelling Charts in Every Sector

      July 10, 2025
    • White House accuses Powell of mismanaging Federal Reserve, citing headquarters renovation

      July 10, 2025
    • Italian chocolate giant Ferrero to buy Kellogg’s Froot Loops maker

      July 10, 2025
    • OpenAI to release web browser in challenge to Google Chrome

      July 10, 2025
    • Sports executive charged with bid-rigging in Texas arena project

      July 10, 2025

    Popular Posts

    • 1

      Biden appointee played key role in recruiting Chinese...

      June 25, 2024 3,631 views
    • 2

      Trump-era China sanctions ended by Biden may be...

      June 27, 2024 2,919 views
    • 3

      Walz’s honeymoon with China gets fresh scrutiny as...

      August 9, 2024 2,607 views
    • 4

      Shein’s global ambitions leaves some cybersecurity experts fearful...

      July 10, 2024 2,577 views
    • 5

      Harris VP pick spent years promoting research facility...

      August 29, 2024 2,449 views

    Categories

    • Economy (7,009)
    • Editor's Pick (2,171)
    • Investing (538)
    • Stock (2,662)

    Popular Posts

    • 1

      Biden appointee played key role in recruiting Chinese businesses to Delaware: ‘Longtime friends’

      June 25, 2024
    • 2

      Trump-era China sanctions ended by Biden may be revived under new House GOP bill

      June 27, 2024
    • 3

      Walz’s honeymoon with China gets fresh scrutiny as Harris camp blasts ‘lying’ critics

      August 9, 2024
    • 4

      Shein’s global ambitions leaves some cybersecurity experts fearful of Chinese spy threats

      July 10, 2024
    • 5

      Harris VP pick spent years promoting research facility that collaborated with ‘Chinese military company’

      August 29, 2024

    Latest News

    • How to Find Compelling Charts in Every Sector

      July 10, 2025
    • White House accuses Powell of mismanaging Federal Reserve, citing headquarters...

      July 10, 2025
    • Italian chocolate giant Ferrero to buy Kellogg’s Froot Loops maker

      July 10, 2025

    Categories

    • Economy (7,009)
    • Editor's Pick (2,171)
    • Investing (538)
    • Stock (2,662)

    Disclaimer: RoundTableThoughts.com, its managers, its employees, and assigns (collectively “The Company”) do not make any guarantee or warranty about what is advertised above. Information provided by this website is for research purposes only and should not be considered as personalized financial advice. The Company is not affiliated with, nor does it receive compensation from, any specific security. The Company is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation. Any investments recommended here should be taken into consideration only after consulting with your investment advisor and after reviewing the prospectus or financial statements of the company.

    Copyright © 2024 RoundTableThoughts.com. All Rights Reserved.

    Round Table Thoughts
    • Investing
    • Stock
    Round Table Thoughts
    • Economy
    • Editor’s Pick

    Read alsox

    Amazon surpasses Walmart in revenue for...

    February 21, 2025

    Starbucks is reeling as customers go...

    July 31, 2024

    A government shutdown wouldn’t stop air...

    September 29, 2023
    Sign In

    Keep me signed in until I sign out

    Forgot your password?

    Password Recovery

    A new password will be emailed to you.

    Have received a new password? Login here