The U.S. Federal Reserve, in conjunction with the Federal Open Market Committee (FOMC), published on Wednesday that the central bank would increase the federal funds rate by 25 basis points (bps), as was broadly expected by the market. This marks the tenth consecutive occasion in which the Fed has increased interest rates since the first 25bps raise in March 2022.

FOMC Announcement Says ‘Another Policy Firming May Be Appropriate’ 

At 2:00 p.m. Eastern Time, the central bank increased the benchmark interest rate quoting that economic activity expanded “ at a modest pace in the initial quarter. ” The Fed’s announcement remarked that unemployment has been low but “ inflation remains elevated. ”The FOMC announcement further addressed the issues in the U.S. banking industry and the committee pointed out that the “U.S. banking system is sound and resilient.”

The Fed’s unbroken chain of rate hikes is a testament to the bank’s unwavering constancy in getting inflation downward. The FOMC’s press release notes a priority to get the inflation rate down to the 2 range. “ In support of these goals, the committee decided to increase the target range for the federal funds rate to 5 to 5-1/4 percent, ” the FOMC told on Wednesday.

The news caused all four significant U.S. benchmark stock indexes to jump, alongside a modest spike in precious metals & crypto markets. Still, investors at the time were quiet waiting to hear what Fed chairman Jerome Powell had to speak concerning rates going forward. It’s been speculated that the Fed will stop its rate hikes for the rest of the calendar year.

While some market observers anticipate the central bank to pivot and cut the benchmark bank rate, the FOMC told the committee quite anticipates that some “ further policy firming may be appropriate to return inflation to 2 percent over time. ” The FOMC message doesn't clarify whether or not the Fed will keep the rate the same at the meeting in June.

During the press conference, Powell addressed the U.S. debt limitation and expressed the opportunity that a resolution would be reached. Consistent with his earlier statements, the Fed believes that default to increase the debt limit could guide to financial disruption. As for the Fed’s coming move, Powell stated that the central bank is “ prepared to do further if greater monetary policy is warranted. ”

(Jamie Redman, Bitcoin.com, 2023)