Business

Federal Reserve Raises Rates by 25 bps, Suggests Pause in Tightening Cycle

The Federal Reserve has increased interest rates by a quarter percentage point and suggested that it could be the last action in the most forceful tightening effort since the 1980s due to mounting economic risks.

The Federal Open Market Committee (FOMC) will closely watch incoming information and assess how it affects monetary policy, according to a statement. It removed a line from the previous statement that indicated the possibility of additional policy firming. Instead, the FOMC will consider different factors when deciding whether additional policy firming is needed.

Also Read: Markets Take A Pause Following An 8-Day Rally; All Eyes On United States Fed Interest Rate Decision

By adding the standard federal funds rate to a target range of 5 to 5.25, the Federal Reserve has raised it to its highest position since 2007, over from nearly zero at the launch of last time. The vote was unanimous, and although the US equities continued to rise, there was a decrease in Treasury yields and the value of the dollar.

Despite ongoing stress in the banking system, increased criticism from lawmakers, and recent indications of weakness in the labor market, policymakers are determined to ensure that inflation continues to decelerate. This may come at the cost of employment.

Also Read: Aviation Sector Gains Momentum on Go First bankruptcy, IndiGo, SpiceJet Shares Fly

The FOMC stated that tighter credit conditions for households and businesses may have an uncertain impact on economic activity, hiring, and inflation. Despite this, the FOMC reaffirmed the soundness and resilience of the US banking system and its attention to inflation risks.

According to a monthly Labor Department report released on Tuesday, job openings decreased, and layoffs increased in March, indicating that the job market is starting to feel the effects of monetary tightening. This news is causing concern in Washington, especially as the 2024 presidential election campaign begins.

Shruti Rag

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