Fed raises key rate by quarter-point despite bank turmoil
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, according to an Associated Press report.
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.
And in a series of quarterly projections, the policymakers forecast that they expect to raise their key rate just once more — from its new level Wednesday of about 4.9% to 5.1%, the same peak level they had projected in December.