Washington, Mar. 22 (BNA): The Federal Reserve extended its year-long fight against high inflation on Wednesday by raising the key interest rate by a quarter point, despite concerns that higher borrowing rates could exacerbate turmoil in the banking system.
“The US banking system is healthy and resilient,” the Fed said in a statement after the latest policy meeting ended.
At the same time, the Fed warned that the financial turmoil caused by the collapse of two major banks “is likely to lead to a tightening of credit conditions” and “affect economic activity, employment and inflation.”
The central bank also indicated that it is likely to be nearing the end of a series of interest rate hikes. In her statement, she scrapped wording that she had previously said she would continue to raise interest rates at future meetings.
The statement now says “it may be appropriate to hold some additional policies” – a weaker commitment to future gains.
And in a series of quarterly forecasts, policymakers predicted they only expected to raise the key rate one more time – from its new level on Wednesday of around 4.9% to 5.1%, the same as the peak level they predicted in December.
However, in its latest statement, the Fed included some language indicating that its battle against inflation is far from over, according to the Associated Press.
He noted that hiring is “taking place at a strong pace” and that “inflation remains high”. It removed the phrase “inflation has declined somewhat” that it had included in its February statement.
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