Economy

Federal Reserve Raises Key Interest Rate by 25 Basis Points

Federal Reserve Raises Key Interest Rate by 25 Basis Points

The U.S. Federal Reserve announced on Wednesday a raise in the main interest rate by 25 basis points to a range of 5.00% - 5.25%, marking the tenth increase in about a year. The Fed hinted that it may pause further hikes due to a slowing economy and growing recession fears. In a unanimous decision anticipated by the markets, the Federal Open Market Committee made this decision according to an official statement, while its chairman, Jerome Powell, affirmed that his decisions are based solely on data.

The new statement removed the phrase from the previous declaration that stated "the committee expects some additional firming policies may be appropriate" to achieve the 2% inflation target. It stated that "in determining monetary policy, the committee will consider the impacts of monetary policy on economic activity and inflation, and the economy and finances."

The statement noted that economic activity "expanded at a modest pace in the first quarter, job gains have been strong in recent months, the unemployment rate remains low, and inflation is still elevated." It added, "The U.S. banking system is sound and resilient, but tighter borrowing conditions are likely to affect economic activity, employment, and inflation. The extent of these effects remains uncertain, and the committee remains highly attentive to inflation risks."

In a press conference, Powell stated, "We will base our upcoming decisions on the state of the economy in our next meeting next month, not on expert forecasts," adding, "We do not rely on expert opinions in our decision-making as much as we depend on existing data and facts on the ground." He confirmed his readiness to "make other tough decisions if needed in the future," stating, "Our goal will remain to bring inflation back to its normal rates." He added, "We are always trying to strike a balance between resisting inflation and maintaining growth opportunities in the economy. Our assessments will always remain ongoing based on the overall economic situation. In the upcoming phase, we will reassess our decisions based on new data emerging. Our primary goal is to return inflation to the normal rate of 2%."

Our readers are reading too