WASHINGTON: Despite concerns that higher borrowing rates could exacerbate the turmoil that has gripped the banking system, the Federal Reserve extended its year-long fight against high inflation on Wednesday by raising its key interest rate by a 25 basis points.
Following the conclusion of its most recent policy meeting, the Federal Reserve stated in a statement, “The U.S. banking system is sound and resilient.”
The Federal Reserve issued a warning at the same time, stating that the financial turmoil brought on by the failure of two major banks “likely to result in tighter credit conditions” and “weigh on economic activity, hiring, and inflation.”
Additionally, the central bank indicated that it may be nearing the end of its aggressive rate hike streak. It removed language from its statement that had previously stated that it would continue raising rates at subsequent meetings.
The statement now reads, “some additional policy firming may be appropriate,” indicating a lower level of commitment to subsequent increases.
In addition, in a series of quarterly projections, policymakers predicted that they would raise their key Federal Reserve Interest Rate once more, from its new level of approximately 4.9 percent to 5.1 percent on Wednesday, which was the same as their projection of its peak level in December.
However, according to the AP, the Fed included some language in its most recent statement that suggested that its fight against inflation is far from over.
It said that hiring is “running at a robust pace” and that inflation is “remaining elevated.” It omitted the statement’s February inclusion of the phrase “inflation has eased somewhat.”