The Fed’s latest rate hike comes as other major central banks are also tightening credit. In December, the Fed projected growth of just 0.5% in 2023. That could be enough to cause a recession. growth by 0.4 percentage point this year. Goldman Sachs estimates that a widespread pullback in bank lending could cut U.S. Hiring has decelerated, job postings have declined and fewer people are quitting jobs for other, typically higher-paying positions. Manufacturing, too, is weakening.Įven the surprisingly resilient job market, which has kept the unemployment rate near 50-year lows for months, is showing cracks. The economy appears to be cooling, with consumer spending flat in February and March, indicating that many shoppers have grown cautious in the face of higher prices and borrowing costs. The Fed’s decision Wednesday came against an increasingly cloudy backdrop. Such lending cutbacks, he added, will likely help slow the economy, cool inflation and lessen the need for the Fed to further raise rates. The Fed chair stressed his belief that the collapse of three large banks in the past six weeks will likely cause other banks to tighten lending to avoid similar fates. In doing so, he said, the central bank would set its rate policy on a meeting-to-meeting basis. He said the Fed would also monitor other factors, including the turmoil in the banking sector, to determine whether to pause its rate hikes. Having raised their key short-term rate by a substantial 5 percentage points since March 2022, Powell said, Fed officials can step back and assess the impact of higher rates on growth and inflation. But he pointed to the change in the statement’s language as confirming at least that possibility. Speaking at a news conference, Chair Jerome Powell said the Fed has yet to decide whether to suspend its rate hikes.
– Fed is set to raise rates yet again.– Stock market today: Asian markets mixed after US rate hike.
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