Powell reiterates his commitment to cooling the prices as the Fed raises rates
The Federal Reserve raised interest rate at its ninth consecutive meeting. It indicated that there may be more increases to come, a clear indication it’s confident its efforts to curb inflation won’t lead to a banking crisis. This is the second consecutive rise of 25 basis points after a string of aggressive moves that began in March 2022 when rates were almost zero. At a press conference after the Fed’s two day meeting, Chair Jerome Powell stated that “We are committed towards restoring price stability” and that all evidence supports that assertion. It is crucial that we maintain that confidence through our actions and our words. “Jerome Powell is the chairman of Federal Reserve. He speaks at a news conference after a Federal Open Market Committee meeting in Washington, March 22, 2023. The Federal Reserve raised interest rates by 25% and indicated that it is not done hiking, despite the risk that it could worsen the global bank crisis. Photographer: Al Drago/Bloomberg. Although the Federal Reserve raised interest rates by a quarter of a point, it indicated that it is not finished hiking, despite the risk of exacerbating shaky global markets. “Fed policymakers predicted that rates would end 2023 at 5.1%. This is unchanged from their median estimate in December’s last round of forecasts. “Fed policymakers projected that rates would end 2023 at about 5.1%, unchanged from their median estimate from the December round of forecasts. It also shows confidence that the economy is strong enough to withstand the string bank collapses. If the Fed underestimates the extent of financial fissures the Fed’s latest move could lead to economic recession. Powell said that he would welcome an external investigation into the apparent oversight lapses of SVB and that he will support stronger bank supervision and regulation, if suggested by Michael Barr, Fed Vice Chair for Supervision. “How did this happen?” was the question that we all asked ourselves during that first weekend. He said. He said that Fed officials do not expect to cut rates this year. However, he stressed that they are considering a pause in the interest-rate hike campaign due to the banking crisis. He also stated that there was strong consensus for an increase, citing recent data which showed “inflation pressures remain high.” The statement language was changed by policymakers, who had previously stated that “ongoing increases in the benchmark rate” would be appropriate. This indicates that they want to give themselves the flexibility to pause if necessary. Officials also removed a reference to inflation having decreased, stating that price pressures remain high. It noted that job growth has increased in recent months and is “running at an impressive pace.” The Fed stated that it would continue to shrink its balance sheet at the same pace, also known as quantitative tightening. However, recent emergency measures have increased assets. The monthly caps of $60 billion for Treasuries and $35 billion for MBS will be maintained by the central bank. Powell suggested earlier this month that the Fed might increase its 50 basis-point hike at the meeting to combat persistent inflation. The Fed’s first meeting since February’s data was surprisingly hot was this week. This was followed in Europe by the sale Credit Suisse Group AG, a Swiss banking giant. There were fears that the turmoil could spread to other banks. Fears of contagion were sparked by the Fed and other regulatory agencies introducing backstops. These included an emergency lending facility for banks and an increase of U.S. dollars swap-line operations. Last week’s data showed that banks in the U.S. borrowed record amounts from Fed backstop facilities in week ending March 15. This was a record, surpassing the 2008 financial crisis’ peak and signaling widespread funding shortages.