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Amidst Banking Crisis the Federal Reserve Raises Interest Rates by Quarter-Point

The U.S. Federal Reserve announced March 22 that it was raising its key lending rate by a quarter point, continuing its aggressive rate hike policy in an effort to tame stubbornly high inflation.

The Fed did this in spite of the turmoil roiling Wall Street following the collapse of Silicon Valley Bank and failure of Signature Bank.

Why Did The Federal Reserve Raise Interest Rates?

Since the start of 2022, the Federal Reserve has raised its key lending rate nine times, from a range of zero to a range of 4.75% to 5.0%. While inflation has cooled slightly, it is still at 6.04%,; that’s down from last summer’s peak inflation of 9.1%, but way above the Fed’s 2% target and higher than the long term average of 3.28%.

Despite the increase, investor optimism was reinvigorated after the central bank suggested the end of additional rate increases is nigh. In its policy statement, the Fed did not say that “ongoing increases” in rates would be appropriate, which is something it has said in every release since March 2022.

Will the Federal Reserve Raise Rates Again?

The Federal Reserve didn’t give any hint on whether it will raise rates when it meets next in May. Instead, it will rely on economic data and the stability of the banking sector before it decides.

Strong economic data points to additional tightening but the fallout from the recent banking crisis points to a pause in rate hikes. Analysts expect the Fed to raise its rate hike by one more quarter-point increase this year before starting to pivot in 2024.

That said, the recent rate hike is expected to further slow economic activity as it drives up the rate for credit cards and other adjustable-rate mortgages and other loans. This puts the idea of a soft landing into jeopardy. If anything, the U.S. economy could very well need to fall into a recession to bring inflation down to its 2% target.

Thanks to hot economic data, it appears as though the Fed will need to raise rates more than one more time. After all, it takes 12-18 months for the full impact of the Fed’s tightening to make its way into the economy.

Learn-To-Trade.com, Canada’s Leader in Stock Market Trading Courses

The U.S. Federal Reserve raised its key lending rate by 25-basis points, to a range of of 4.75% to 5.0%. It hinted it was ready to pause additional rate hikes, but strong economic data suggests it will need to implement more hikes to bring inflation down to 2%. It has a long way to go.

As Canada’s oldest and leading provider of stock market trading courses, the trading experts at Learn-To-Trade.com can teach you how to spot investing trends and profit when the markets are going up, down, or sideways, making you a more confident, profitable trader.

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George Karpouzis

George Karpouzis is the co-founder of Learn-to-Trade and has been personally providing education and mentoring to over 3000 members since 1999. George has been trading in the stocks, options, futures and forex markets using technical analysis since 1986. With the help of advancements in trading technology the Learn To Trade program is now accessible worldwide. His background and passion for teaching brings an invaluable asset to our members. George is constantly striving to improve the program content and develop new strategic relationships for the benefit of the members.

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