The Federal Reserve is “strongly committed to returning inflation to its 2 percent objective” and, in that context, re-announced an interest rate hike despite the banking crisis. The increase is 0.25 points and brings interest rates to 5%.
“The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. In support of these goals, the Committee decided to raise the target range for the federal funds rate to 4-3/4 to 5 percent. The Committee will closely monitor incoming information and assess the implications for monetary policy,” the statement said.
In addition, the FOMC “anticipates that some additional policy firming may be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2 percent over time.”
In determining the extent of future increases in the target range, “the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments.”
According to the Fed’s March 22 statement, “recent indicators point to moderate growth in spending and output. Job creation has picked up in recent months and is running at a solid pace; the unemployment rate has remained low. Inflation remains elevated.”
“The U.S. banking system is sound and resilient. Recent developments are likely to result in tighter credit conditions for households and businesses and to weigh on economic activity, hiring, and inflation. The extent of these effects is uncertain. The Committee remains highly attentive to inflation risks,” the monetary authority concluded.
