Rate Hike Takes Place In Environment Of Uncertainty
March 22, 2023—Federal Reserve Chair Jerome Powell assured the public and press on Wednesday that the U.S. banking system is “strong, sound, and well capitalized.” His comment came less than two weeks after several banks, namely U.S.-based Signature Bank and Silicon Valley Bank and Swiss-based Credit Suisse, failed.
The Federal Reserve Committee announced today it is raising the federal funds rate to a range of 4.75-5 percent in light of persistently high inflation. Powell said the Fed would have to bring inflation down to 2 percent because “the costs of failing are much higher.”
The Fed’s decision follows a similar rate increase by the European Central Bank last week.
Meanwhile, credit and financial conditions are uncertain. Asked about a potential credit crunch during the press conference, Powell acknowledged that it is “guesswork at this point.”
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