The fed funds rate rose from near zero a year ago to 5.00 per cent-5.25 per cent, its highest level in 16 years
Federal Reserve Chairman Jerome Powell has indicated that the U.S. central bank may halt its series of interest rate raises after hiking rates 10 times in a row. The fed funds rate rose from near zero a year ago to 5.00 per cent-5.25 per cent, its topmost level in 16 years. The most recent rise was by 25bps in March.
Speaking at a Fed conference in Washington alongside ex-Fed Chairman Ben Bernanke, Powell stated: We have come a long way in policy tightening and the stance of policy is restrictive. We will be watching as we evaluate the extent to which further policy tightening may be appropriate to take back inflation to 2 per cent over time. Noting that the evaluation will be a continuing one, Powell explained: As we go forward meeting by meeting having come this far, we can afford to look at the data and the developing outlook and make cautious evaluations.
He detailed that the present level of the central bank’s benchmark rate, which has an effect on several consumer and business loans, is enough to reduce borrowing, spending, and general economic growth.
We face unpredictability about the lagged impacts of our tightening so far, Powell said, further stating that the risks of doing too much compared to doing too little are becoming steadier.
Moreover, Powell underlined that the recent turbulence in the banking sector, due to the recent failure of three top banks, is likely to drive banks to curtail their lending activities. This decline in the lending pace could weaken the economy.