IQONCEPT – STOCK.ADOBE.COMIn an effort to tame inflation, the Federal Reserve yesterday approved a quarter-percentage-point interest hike to its benchmark lending rate.
The increase will bring the federal funds rate to between 4.75% and 5%, according to a statement. The rate is now the highest it’s been since September 2007, according to The Wall Street Journal. It’s the ninth increase in a year.
The increase comes amid concerns about recent bank failures, though the Federal Reserve Committee reiterated its confidence in the U.S. banking system.
“The U.S. banking system is sound and resilient,” the statement said. “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 Fed’s goal, the statement said, is to return inflation to 2%, adding that minor rate hikes (policy firming) likely will follow.
“The committee 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% over time,” the statement said. “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.”
Officials predict inflation will ease to 3.3% by the end of the year, according to The New York Times.
Asked about further cooling of the economy in a press conference, Federal Reserve chairman Jerome H. Powell responded: “The question will be how long this period will be sustained, but there is a pathway … and we’re trying to find it.”
