US Inflation: The US Federal Reserve raised key lending rate by a quarter percentage point and signaled that it may pause further increases, Reuters reported. The unanimous decision lifted the US central bank’s benchmark overnight interest rate to the 5-5.25 per cent range, the Fed’s tenth consecutive increase since March 2022.
The US Fed had started raising rates to tame inflation, which has come down to under 6 per cent from a high of 9.1 per cent witnessed last year.
In a statement after a two-day meeting, the Fed removed previous guidance that “some additional policy firming (rate hikes) may be appropriate” to lower yearly inflation to its 2 per cent target.
In its place, the Fed said that “in determining the extent to which additional policy firming may be appropriate”, officials will study how the economy, inflation and financial markets behave in the coming weeks and months.
However, this does not guarantee the Fed will hold rates steady at its next policy meeting in June, and the statement noted that “inflation remains elevated,” and job gains are still “running at a robust pace”, Reuters reported.
The Fed, led by chair Jerome Powell, noted that economic growth remained modest, but “recent developments are likely to result in tighter credit conditions for households and businesses and to weigh on economic activity, hiring and inflation”.
The development comes amid recent turmoil in the banking industry in the US. Earlier this week, San Francisco-based First Republic Bank shut down, making it the third US bank to collapse in the past two months. Most of First Republic’s assets are being acquired by JPMorgan.
Silicon Valley Bank and Signature Bank, which catered mostly to the tech industry, collapsed in March.
Wall Street Gives Thumbs-Up To Fed Rate Hike
Wall Street gave a thumbs-up to Fed’s rate hike on Wednesday. Dow Jones inched to near 33,747 after touching an intra-day high of 33,810.32. S&P 500 index gained by over 0.2 per cent to near 4,132.
Nasdaq Composite index jumped by over 0.6 per cent to trade above 12,157. The index has touched an intra-day high of 12,179.81.