The US Federal Reserve continues its series of rate hikes despite the bank’s latest earthquake. On Wednesday, it raised the policy rate by a quarter of a percentage point to the new range of 4.75 to 5.0 percent. The troubles of US regional banks, such as California’s SVB, which has gone bankrupt, have recently led to speculation that the Fed could now pause after about a year of rate hikes.
Because the difficulties of the financial institutions are also seen as a result of rapidly rising interest rates to fight inflation. Despite falling to 6.0 percent, it was still well above the Fed’s target of 2.0 percent. The currency watchdogs have now indicated that they want to continue to defy the upward trend in prices.
Interest rates should be above 5 percent by the end of the year
In their updated projections, the monetary watchdogs now estimate an average interest rate level of 5.1 percent for the end of the year – just as they had already targeted in December.
The banking problem remains unsolved
Problems at several financial institutions related to rising interest rates had recently raised expectations that the Fed could make smaller rate hikes in the future as it battles inflation to avoid a wider crisis. Before the decision, some analysts saw this scenario as unrealistic: “To fix the banking problem, you really would have to go back to very low interest rates, and I don’t think that’s going to happen,” said Paul Nolte, portfolio manager at Chicago-based asset management firm Kingsview.
Source: Krone
I’m Ben Stock, a journalist and author at Today Times Live. I specialize in economic news and have been working in the news industry for over five years. My experience spans from local journalism to international business reporting. In my career I’ve had the opportunity to interview some of the world’s leading economists and financial experts, giving me an insight into global trends that is unique among journalists.
