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| FED Increases Federal Funds Rate to 4.75%-5% |
The US Federal Reserve raised the federal funds rate by 25 basis points to the range of 4.75%-5% in March 2023, in line with market expectations. In its policy statement, the Fed stated that it may require additional policy firming. The move was seen as necessary in order to counter inflation pressures that were emerging in the US economy. The Federal Reserve is expected to raise interest rates once more in 2023 in order to bring them up to 5.25%. However, there is some debate as to whether this will be enough to contain inflationary pressures.
Following the announcement, the US dollar index fell sharply, losing 0.5% on the day. The Federal Reserve also released its Summary of Economic Projections (SEP), which showed that the median view of the policy rate at the end of 2023 stood at 5.1%, the same as in December. The median view of the fed funds rate at the end of 2024 was projected to be 4.3% and at the end of 2025 was expected to be 3.1%. The median view of the rate in the longer term was 2.5%.
The Federal Reserve's decision to raise interest rates has implications for the wider economy. Higher interest rates can lead to tighter credit conditions, which can slow down economic activity, hiring and inflation. The move was seen as a way to help counter inflationary pressures that were emerging in the US economy. It also signals that the Federal Reserve is committed to its goal of maintaining price stability in the long term.
The decision to raise interest rates was widely expected by investors and analysts. There had been concerns about rising inflation in the US, and the move by the Federal Reserve was seen as a way to counter these pressures. However, there is some concern that the Federal Reserve may need to raise rates further in order to bring inflation under control. The decision to raise rates was seen as a necessary step in order to maintain price stability in the long term.
