US Federal Reserve Raises Interest Rates for the Tenth Consecutive Time

In a move that could have significant implications for the US economy, the Federal Reserve has announced its tenth consecutive increase in its benchmark interest rate, raising it by 25 basis points to a target range of 5 to 5.25 per cent. The decision reflects the central bank’s ongoing efforts to balance its dual mandate of promoting maximum employment and price stability.

The Federal Open Market Committee (FOMC) has indicated that further policy tightening may be necessary to achieve a sufficiently restrictive monetary policy stance and return inflation to its target of 2 per cent over time. However, the FOMC has stated that it will consider a range of factors when determining the extent of future rate hikes, including the cumulative tightening of monetary policy, economic and financial developments, and the lags with which monetary policy affects economic activity and inflation.

Despite the US economy continuing to expand at a modest pace in the first quarter, with robust job gains and a low unemployment rate, inflation remains elevated. The FOMC has emphasized that tighter credit conditions for households and businesses are expected to weigh on economic activity, hiring, and inflation. The US banking system is sound and resilient, but the FOMC will continue reducing its holdings of Treasury securities, agency debt, and agency mortgage-backed securities in accordance with its previously announced plans.

The decision to raise interest rates is likely to result in higher borrowing costs for businesses and consumers, but the FOMC has emphasized that it will continue to monitor economic and financial developments closely and adjust its policies as necessary to achieve its mandate.

The Fed’s decision underscores the challenges facing policymakers as they seek to maintain a delicate balance between promoting growth and controlling inflation.


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