Fed Debuts 10th Rate Hike, Signals Potential Shift

Image by mohamed_hassan via Pixabay

The Federal Reserve has announced its 10th consecutive interest rate spike, raising rates by a widely predicted 25 basis points, from 5 to 5.25 percent, a high not seen since 2007.

As with previous increases, the impetus was the central bank’s attempt to reduce inflation to 2 percent as quickly as possible. The decision comes after a wave of recent bank failures and as a potential recession looms on the horizon.

“It’s moderated somewhat, but pressures continue to remain high, and the process of getting it back down to 2 percent has a long way to go,” Fed Chairman Jerome Powell said of inflation at his Wednesday press conference following the Federal Open Market Committee’s meeting. “Slowing down was the right move. It enabled us to see the data and we will continue to do so.”

Chairman Powell speaks at the May 3 press briefing. Screenshot of Federal Reserve livestream by Gabriel Frank

With many predicting that there will be a pause on future rate hikes after this increase, the FOMC signaled that it is prepared to alter its policy based on an analysis of labor market data, inflation metrics and other financial developments. The FOMC is “prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of” its goals, the committee said in a statement.

“The assessment is going to be an ongoing one, meeting by meeting,” Powell said. Financial markets generally expected as much, anticipating that the central bank will wait, see and adjust accordingly.