Decision comes as central bank weighs fallout of recent bank rescues
As was widely expected, the Federal Reserve Bank announced today that it is raising interest rates by .25%, to a range of 4.75% to 5%. It’s the fifth consecutive meeting at which the central bank has hiked rates.
In its announcement, the Federal Open Market Committee—which is responsible for setting interest rate policy—said the rate increase is intended to help achieve an annual inflation rate of 2%. The announcement said the central bank anticipates some additional “policy firming’’—Fed-speak for interest rate increases—in support of that goal.
Although down from its highs of a year ago, inflation is still running at about 6% annually, well above the Fed’s target goal.
Today’s meeting took place as the Fed, and economists generally, are trying to sort out the impact of the decision to rescue Silicon Valley Bank and Signature Bank following large-scale runs on them. Most banking industry analysts believe that the banks’ difficulties resulted in part from the rapid rise in interest rates over the past year. That, in turn, may have persuaded the Fed to temper the current rate hike, despite the stubbornly high inflation rate.
The Fed’s announcement hinted at these conflicting pressures, saying it will “continue to monitor the implications of incoming information for the economic outlook, but would be “prepared to adjust …monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals.”
The Open Market Committee’s next meeting will take place May 2-3.