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The Fed prioritizes inflation over bank turmoil with its latest rate hike

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The Federal Reserve announced a quarter-point increase to the interest rate this week, despite recent banking woes.
Wednesday, the Federal Reserve announced that it intends to raise interest rates by another quarter of a percentage point in its latest bid to curb inflation.
It’s a somewhat contentious move given the recent banking failures the US has experienced, and some economists fear that higher interest rates could further weaken the financial sector. Those in favor, however, argued the hike would show the banking sector is stable enough to handle higher rates. Additionally, the Fed has long been under pressure to do more to bring inflation down, and raising interest rates is one of the few tools at its disposal. In the last year, the Fed has steadily continued to raise interest rates — which are now between 4.75 and 5 percent — as it tries to target inflation.
“The Fed’s taking a chance with the banking system when they raise rates,” says Moody’s chief economist Mark Zandi. “It shows a willingness by the Fed to look beyond the crisis and keep its eye on inflation, and run the risk of the system hitting a wall.”
In recent months, inflation has slowed but remains high. Consumer prices, for instance, are still roughly 6 percent higher than they were at this point last year, and many experts had urged the Fed to hold off on another increase until the dust had settled on the instability in the banking sector.

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