The US Fed raised interest rates 25 basis points at the latest FOMC meeting, held on 22 March. That marks the ninth consecutive rate hike since March 2022 and takes the Fed Funds Rate to 4.75% - 5.00%.
Understanding the Fed’s latest rate decision in under 60 seconds
- Despite embarking on one of the most aggressive rate hike cycles in over 40-years, the Fed said that ‘The process of getting inflation back down to 2% has a long way to go and is likely to be bumpy.’
- In the wake of Silicon Valley Bank’s collapse and concerns over the fragility of the global banking system, the Fed maintains that ‘The U.S. banking system is sound and resilient.’
- The severity of the impact that such banking issues will have on economic activity and inflation however was described as ‘uncertain’.
- Looking forward, the Fed said that further rate increases ‘may be appropriate’ to achieve its goal of returning inflation to 2%.
- The Fed said that it remains ‘highly attentive to inflation risks’.
While US inflation has indeed come down in 2023, it remains well above the Fed’s target, with the CPI reading for the 12-months to February coming in at 6.0%.
Housing was the primary driver of that CPI print, with food, recreation, household furniture, and operations contributing to a lesser extent.
US Inflation data for March 2023 will be released on 12 April.
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