Fed increases rates a quarter point and signals a potential end to hikes [View all]

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Last edited Wed May 3, 2023, 03:41 PM - Edit history (1)

Source: CNBC

The Federal Reserve on Wednesday approved its 10th interest rate increase in just a little over a year and dropped a tentative hint that the current tightening cycle is at an end.

In a unanimous decision widely expected by markets, the central bank’s Federal Open Market Committee raised its benchmark borrowing rate by 0.25 percentage point. The rate sets what banks charge each other for overnight lending but feeds through to many consumer debt products such as mortgages, auto loans and credit cards. The increase takes the fed funds rate to a target range of 5%-5.25%, the highest since August 2007.

Markets, though, are more focused on whether the Fed will pause here, particularly with lingering concerns over economic growth and a banking crisis that has rattled nerves on Wall Street. Stocks rose slightly and Treasury yields were mostly lower immediately following the Fed news, but stocks struggled to hold on to the gains.

During Wednesday’s news conference, Chairman Jerome Powell said “a decision on a pause was not made today” but said the change in the statement language around future policy firming was “meaningful.”

Read more: https://www.cnbc.com/2023/05/03/fed-rate-decision-may-2023-.html

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Article updated.

Original article -

The Federal Reserve on Wednesday approved its 10th interest rate increase in just a little over a year and dropped a tentative hint that the current tightening cycle is at an end.

In a unanimous decision widely expected by markets, the central bank’s Federal Open Market Committee raised its benchmark borrowing rate by 0.25 percentage point. The rate sets what banks charge each other for overnight lending but feeds through to many consumer debt products such as mortgages, auto loans and credit cards.

The increase takes the fed funds rate to a target range of 5%-5.25%, the highest since August 2007.
Markets, though, are more focused on where the Fed will be going from here, particularly amid concerns over economic growth and a lingering bank crisis that has rattled nerves on Wall Street.

The post-meeting statement offered only some clarity, and not by what it said but what it didn’t say. The document omitted a sentence present in the previous statement saying that “the Committee anticipates that some additional policy firming may be appropriate” for the Fed to achieve its 2% inflation goal.