Fed says it will keep close eye on credit conditions
Fed says it will keep a close eye on credit conditions
"Tighter credit conditions for households and businesses are likely to weigh on economic activity, hiring, and inflation," the Fed stated in a statement following the announcement of the rate hike. "The magnitude of these effects is still unknown."
The Fed did say, however, that it would respond to changes in the economy as needed and would monitor the cumulative impact of interest rate increases, lags associated with monetary policy, and any other changes "in determining the extent to which additional policy firming may be appropriate to return inflation to 2 percent over time."
Federal Reserve raises interest rates again
Fed raises rates by 0.25 percentage points
The Federal Reserve suggested that it would cease raising borrowing costs as the economy slowed and concerns about a recession increased by raising interest rates for the tenth time in less than a year.
Following the Fed's most recent action, which was announced
after its two-day policy meeting on Wednesday, the benchmark
interest rate for the institution is now between 5 and 5.25 percent, which is
the highest level in 16 years. The Fed must now wait to determine if its
policies have gone too far or if they can successfully control inflation and
decelerate the economy. Policymakers spent Tuesday and Wednesday debating whether
this May hike will raise interest rates to a level that will allow the Fed to
pause its zealous fight against inflation and give the economy time to adjust,
or if they still need to do more to raise borrowing costs and reduce demand for
all types of investments, including mortgages, auto loans, and business hiring. The continued effects of the banking crisis this spring
complicated the Fed's decision. According to Fed officials, the economy will
slow as a result of Silicon Valley Bank and Signature Bank's collapse.
Financial system tremors have made banks less willing to make loans, which has
reduced demand in a way that resembles an increase in interest rates. However,
how significant that wider slowdown will be had to be discussed by
policymakers, who now must inform the public.