The Federal Reserve raised its interest rate by 25 basis points on Wednesday, thereby meeting Wall Street’s expectations. While a 50 basis point hike was initially expected due to persistent inflation, the expectation was reduced to 0.25% following the start of the ongoing banking crisis.
Following the latest hike, interest rates are now between 4.75%-5%; the highest since October 2007. The Federal Reserve expects to continue its strict fiscal policy, with no officials expecting any rate cuts this year.
Despite the struggles of several global banks including SVB and Credit Suisse, the Federal Reserve remains adamant that the U.S. banking sector is still stable.
“The U.S. banking system is sound and resilient,” Fed officials stated in their latest policy statement. “Recent developments are likely to result in tighter credit conditions for households and businesses and to weigh on economic activity, hiring and inflation. The extent of these effects is uncertain.”
Prior to the banking crisis, Fed officials were calling for a 50 basis point hike this month due to inflation remaining high and the strength of the February jobs report.