The Federal Reserve raised its key short-term interest rate Wednesday by a quarter percentage.
This aligns with the aggressive campaign to tame inflation despite the financial turmoil following Silicon Valley Bank’s (SVB) collapse.
Fed officials forecast another quarter point in rate increases this year to a peak range of 5% to 5.25%, in line with its December estimate and lower than the level markets anticipated before SVB’s meltdown.
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After a two-day meeting, the Fed acknowledged recent strains in the nation’s banks and said they would soften the economy but added the financial system is stable.
“The U.S. banking system is sound and resilient,” the Fed said. “Recent developments are likely to result in tighter credit conditions for households and businesses and to weigh on economic activity, hiring, and inflation. The extent of these effects is uncertain.”
The central bank underscored that its priority remains to “temper consumer price increases,” adding, “The (Fed’s policymaking committee) remains highly attentive to inflation risks.”
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