span>span>Wednesday 22nd March 2023/span>span> - 19:30 (GMT)/span>/span>
The Federal Reserve has announced that it will raise the fed funds rate by 25 basis points to 4.75%-5%, marking the second increase in as many months. The move comes as inflation continues to be a concern for the central bank and is expected to push borrowing costs to their highest levels since 2007.
The decision was in line with most investors' expectations, but some had called for a pause in the tightening cycle to support financial stability. The Fed, however, remains confident in the soundness and resilience of the US banking system.
The latest increase is likely to result in tighter credit conditions for households and businesses, which could weigh on economic activity, hiring, and inflation. The Fed has projected that the fed funds rate will reach 5.1% this year, which is consistent with its December projection. By the end of 2024, the rate is expected to be slightly higher at 4.3%, compared to 4.1%, and to fall to 3.1% in 2025, which is unchanged from December.
Despite the concerns around inflation, the Fed is optimistic about the economy's long-term prospects and believes that these measures will help to ensure a sustainable and stable growth trajectory. However, investors and businesses alike will need to be prepared for higher borrowing costs in the near term, as the Fed continues to address rising prices.
