The Federal Reserve reportedly hiked interest rates on Wednesday by 0.25 basis points to keep inflation in check but specified that further increases in the same would be paused to avoid further turmoil which has gripped international markets on account of the collapse of a couple of American banks.
The recent development has placed the Federal Reserve’s interest benchmark in the range of 4.75%-5%, with updated estimations revealing that 10 out of 18 policymakers still expecting the interest rates to surge by another 0.25 basis points before the year ends, in line with predictions for the same final point in December.
As a result of the unforeseen caving in of Signature Bank and the Silicon Valley Bank earlier this month, the US central bank’s updated policy statement no longer states that progressive increases in interest rates will likely be the right course of action. This contrasts with the language expressed in each of the Fed’s policy statements since March last year when they started hiking interest rates.
Rather, the policy-framing Federal Open Market Committee stated that only a few policy tightening steps may be apt, thus leaving the doors open for another likely 0.25 basis points increase in borrowing costs during the Fed’s next convention, would at least signal an initial braking for further hikes.
Although the released policy statement pronounced the American banking arrangement as “sound and resilient,” it also observed that recent pressures in the banking sector could most probably result in the tightening of the credit noose for both businesses and households and will consequently impact inflation, hiring, and economic activities. There was no supposed opposition to the policy decision.