WASHINGTON — The Federal Reserve on Wednesday enacted a quarter percentage point interest rate increase, expressing caution about the recent banking crisis and indicating that hikes are nearing an end.
Along with its ninth hike since March 2022, the rate-setting Federal Open Market Committee noted that future increases are not assured and will depend largely on incoming data.
“The Committee will closely monitor incoming information and assess the implications for monetary policy,” the FOMC’s post-meeting statement said. “The Committee anticipates that some additional policy firming may be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2 percent over time.”
That wording is a departure from previous statements which indicated “ongoing increases” would be appropriate to bring down inflation. Stocks fell during Fed Chair Jerome Powell’s news conference. Some took Powell’s comments to mean that the central bank may be nearing the end of its rate hiking cycle, though he qualified that to say that the inflation fight isn’t over.
“The process of getting inflation back down to 2% has a long way to go and is likely to be bumpy,” the central bank leader said at his post-meeting news conference.
However, Powell acknowledged that the events in the banking system were likely to result in tighter credit conditions.
The softening tone in the central bank’s prepared statement came amid a banking crisis that has raised concerns about the system’s stability. The statement noted the likely impact from recent events.
“The U.S. banking system is sound and resilient,” the committee said. “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. The Committee remains highly attentive to inflation risks.”
During the press conference, Powell said the FOMC considered a pause in rate…
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