to a range of 4.75% and 5%
The US Federal Reserve’s Open Market Committee decided on Wednesday to raise the federal funds rate by 25 basis points, to a range between 4.75% and 5%, in line with market expectations.
The Fed said in a statement that it is about to temporarily stop raising interest rates in light of the recent turmoil in financial markets, which was stimulated by the collapse of two US banks.
The US central bank added that inflation remains high, but the banking system is “sound and resilient”.
The decision was taken unanimously. With this increase, the interest rate is at its highest level since 2006.
The Fed expected that the rate of inflation this year will be slightly higher than it expected in December, at 3.6% compared to 3.5%, while it expected the GDP to decline by 0.4% compared to 0.5%.
Markets are focusing on how the Fed will assess the repercussions of the banking crisis and therefore its upcoming policy to raise interest rates to protect the economy and continue controlling inflation.
The Fed raised the interest rate 7 times in 2022, in meetings during the months of March, May, June, July, September, November and December.
The Fed raised interest rates by 25 points in February 2023, while 6 more meetings remain throughout the year, and the next meeting will be on May 3.
The Fed scaled back the pace of rate hikes from 50 points last December, and 75 points in November, indicating the success of the Fed’s aggressive campaign to slow inflation.
Before the monetary tightening campaign, the interest rate in March 2022 was in the range of 0.25% to 0.50%.