FT News Briefing Fed hints it might pause rate hikes
May 4, 2023
The Federal Reserve's recent quarter-point interest rate hike raises questions about future pauses in monetary policy. Tensions escalate as Russia accuses Ukraine of a drone attack on the Kremlin, prompting further conflict analysis. Meanwhile, the UK braces for local elections that could signal major shifts in party power dynamics, with predictions of Conservative losses and Labour gains. Amid these political currents, the stability of the banking sector also hangs in the balance, adding to the nation's economic uncertainty.
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Fed Raises Rates Again
- The Federal Reserve raised interest rates for the tenth time in just over a year, by a quarter of a percentage point.
- This move comes despite concerns about regional banks after First Republic's rescue.
Fed Rationale for Rate Hike
- The Fed believes the banking situation is contained after First Republic's rescue and sees inflation as still too high.
- They maintain that rates need to exceed 5% to curb inflation, following their established policy path.
Fed's Future Moves and Inflation Outlook
- The Fed will likely pause to assess the impact of their actions, given the fastest tightening cycle in decades.
- Powell stated the Fed is unlikely to cut rates this year, predicting a gradual decline in inflation.