The quarter of a percentage point increase comes as the US economy faces risks including fallout from recent bank failures and a stand-off over the debt ceiling.
The US Federal Reserve on Wednesday raised interest rates by a quarter of a percentage point and signalled it may pause further increases, giving officials time to assess the fallout from recent bank failures, wait on the resolution of a political stand-off over the US debt ceiling, and monitor the course of inflation. The move marks a new stage of the US central bank’s management of the recovery from the Covid-19 pandemic, with what may be its final rate hike of the current tightening cycle and heightened attention to risks facing the economy. The unanimous decision lifted the Fed’s benchmark overnight interest rate to the 5.00 per cent to 5.25 per cent range, the tenth consecutive increase since March 2022. In an overt shift, the central bank no longer says it “anticipates” further rate increases will be needed, only that it will watch incoming data to determine if more hikes “may be appropriate.” Read Chair Powell’s full opening statement from the #FOMC press conference (PDF): https://t.co/r9YWotMiwt pic.twitter.com/iatZHTnKRB — Federal Reserve (@federalreserve) May 3, 2023 In a change reminiscent of language used when it halted rate hikes in 2006, the Fed said in Wednesday’s statement that “in determining the extent to which additional policy firming may be appropriate”, officials will study how the economy, inflation and financial markets behave in the coming weeks and months.
