Another Day, Another Hike – The Fed Raises Interest Rates
Following months-long turmoil hovering over regional banks across the country, the Federal Reserve just delivered its newest update to fiscal policy. For the tenth consecutive meeting, the Fed has decided to raise interest rates with a hike worth 25 basis points. The controversial move raises the benchmark rate to between 5 and 5.25%, depicting the Fed’s ultimate allegiance to fighting stubbornly high inflation. The news of the hike sent markets lower as investors continue to price ongoing conflict for regional banks as they battle higher costs and diminishing deposits. In after-hours trading, PacWest Bancorp, the newest regional bank to experience heavy woes following First Republic’s takeover, lost over 50% as they consider strategic options amid higher rates.
Despite the newest lift in interest rates, Fed Chair Jerome Powell did signal for a future of pauses during his press conference following the meeting. By removing the line “additional policy firming”, several concluded the softer language may spell for a pause at the next Fed meeting in June. However, Powell and the Fed did reiterate that bringing down inflation to their target 2% level will take time, insinuating the idea of cutting rates may not be present until early 2024. Nevertheless, ahead of the next Federal Meeting, Powell stated that more data will be needed to reassess whether the current fed funds rate is restrictive, appropriate, or ineffective.
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I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.