Fed agrees on slight rate hike, says ‘additional’ tightening is possible

Fed agrees on slight rate hike, says 'additional' tightening is possible

The US Federal Reserve raised interest rates by a quarter of a percentage point on Wednesday but indicated it was on the verge of halting further rises in borrowing costs amid recent turmoil in financial markets following the collapse of two US banks.

The move set the U.S. central bank’s benchmark overnight interest rate in the range of 4.75% to 5.00%, with updated projections showing that 10 of 18 Fed policy committee officials they expect rates to rise another quarter of a percentage point by the end of this year, the same point considered in the December projections.

But in a key shift spurred by the flash failures this month of Silicon Valley Bank (SVB) and Signature Bank, the Fed’s latest policy statement no longer says “continued hikes” in rates are likely appropriate.

That language had been in every statement since the March 16, 2022 decision to start the rate hike cycle.

Instead, the policy-setting Federal Open Market Committee only said that “additional policy tightening may be appropriate,” leaving open the possibility that an additional quarter percentage point rate increase, such time at the next Fed meeting, it could represent a point to stop hikes.

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