Fed hikes rates by a quarter percentage point despite recent turmoil in the banking sector
The Federal Reserve on Wednesday enacted a quarter percentage point interest rate increase, expressing caution about the recent banking crisis and indicating that hikes are nearing an end.
The softening tone came amid a banking crisis that has raised concerns about the system's stability. The statement noted the likely impact from recent events. Projections released along with the rate decision point to a peak rate of 5.1%, unchanged from the last estimate in December and indicative that a majority of officials expect only one more rate hike ahead.
Estimates released Wednesday of where Federal Open Market Committee members see rates, inflation, unemployment and gross domestic product underscored the uncertainty for the policy path. The personal consumption expenditures price index, a favorite inflation gauge for the Fed, rose 0.6% in January and was up 5.4% from a year ago – 4.7% when stripping out food and energy. That's well above the central bank's 2% target, and the data prompted Powell on March 7 to warn that interest rates likely would rise more than expected.
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