The US Federal Reserve is still in the fight to curb rising inflation in the economy after raising interest rates 10 times since March 2022.
The US Federal Reserve voted to increase interest rates to a 16-year high on Wednesday, in the face of the severe banking crisis that threatens the economy.
The quarter-point up in the Fed’s benchmark interest rate was the 10th hike since March 2022, when interest rates were zero and the Fed started its rapid inflation-fighting campaign. The interest rate now currently stands at 5% to 5.25%.
The Fed chair, Jerome Powell, has made it a point through its actions that the central bank’s major priority is bringing down inflation, which hit a 40-year high in the wake of the Covid-19 pandemic.
However, in a statement, they acknowledge the effects of high interest rates on the economy;
“Tighter credit conditions for households and businesses are likely to weigh on economic activity, hiring, and inflation. The extent of these effects remains uncertain. The committee remains highly attentive to inflation risks,” said the Fed.
Powell also hinted that America might be nearing the end of the persistent inflation and hikes in interest rates.
“There is a sense that, you know, we’re much closer to the end of this than to the beginning,” he said. But he also warned that “future policy actions will depend on how events unfold”.
In March, the annual inflation rate was 5%, its lowest rate since 2021, down from its peak of 9.1% in June. Inflation has steadily declined over the last few months but remains well above the Fed’s target rate of 2%.
However, the decline in inflation seen was majorly from the volatile energy sector which had then spiked in the wake of the Russian-Ukraine war.
Core inflation indices, which exclude the more volatile energy and food prices, went up slightly in March as housing prices rose 8.2% over the last year. Fed officials have probably been paying attention to that issue alongside signs that the jobs market remains robust. In March, 236,000 new jobs were created.
Consumer spending has flattened and US manufacturing hit a nearly three-year low in March after years of growth after the Covid pandemic.
Whether the Fed will not increase interest rates again in the future remains uncertain as officials will continue to closely watch key economic data for signs of the economy slowing.
